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Cfie Etural Science Series 

Edited by L. H. Bailey 



RURAL WEALTH AND WELFARE 



f&&& 



RURAL WEALTH AND 
WELFARE 



ECONOMIC PRINCIPLES 

ILLUSTRATED AND APPLIED IN 

FARM LIFE 



/ BY 
GEO. T. FAIRCHILD, LL.D, 






THE MACMILLAN COMPANY 

LONDON: MACMILLAN & CO., Ltd. 

1900 

All rights reserved 



TWO COPIES RECEIVED, 

Office af tit0 






^ 






Copyright, 1900 
By THE MACMILLAN COMPANY 



SECOND COPY, 



S$otmt Ipleaeant JMnterp 

J. Horace McFarland Company 
Harrisburg, Pa. 



DeOtcation 



TO THE THOUSANDS OP STUDENTS IN AGRICULTURAL COLLEGES 

WITH WHOM I HAVE STUDIED ECONOMIC QUESTIONS 

DURING THE PAST THIRTY-PIVE YEARS 

^fjfe little faolume in thankfully UeUicateU 

IN REMEMBRANCE OP 
MANY PLEASANT HOURS 

GEO. T. FAIRCHILD 



PREFACE 

In giving these pages to the public I offer no 
apology for a restatement of fundamental principles 
always requiring adjustment to new life and circum- 
stances; but economic literature has usually dealt too 
exclusively with the phenomena of manufactures and 
commerce to gain the sympathy of rural people. An 
experience of more than thirty years in handling such 
subjects at the Michigan and Kansas Agricultural 
Colleges, together with the expressed confidence of 
former pupils whose judgment I trust, has led me into 
the effort to bring the subject home to farmers and 
farmers' families in this elementary way. 

I have carefully refrained from quotations, or even 
references to works consulted, for the obvious reason 
that such formalities would distract the attention of 
most readers from the direct, common -sense thinking 
desired, and render the style of the book more complex. 
I hereby acknowledge my debt to the leading writers of 
past and present upon most of the topics treated, not 
excluding any school or party. 

(vii) 



viii Rural Wealth and Welfare 

The statements of facts I have taken from best 
authorities, with care to verify, if possible, by com- 
parisons. Many data have been diligently compiled 
and rearranged for more exact presentation of 
facts, and the phenomena of prices of farm crops 
have been analyzed with especial care. The neces- 
sities of the printed volume have to some extent 
obscured the charts by reduction, but I trust they 
may be intelligible and interesting to all students 
of agricultural interests. 

No attempt has been made to argue or to expound 
difficulties beyond a simple statement of principles 
involved, and the spirit of controversy has been absent 
from my thoughts throughout. Whatever bias of 
opinion may appear is without a tinge of bitterness 
toward those who may differ. I trust that men of all 
views may recognize in these pages the wish of their 
author to have only truth prevail. 

In offering this volume to farmers I do not assume 
that all questions of wealth and welfare can be settled 
by rule. I hope to point out the actual trend of facts, 
the universal principles sustained by the facts, and 
means of most ready adjustment to circumstances in the 
evolutions of trade and manufacture. The business 
sense of farmers is appealed to for the sake of their 
own welfare. Several important questions of rural 
welfare have been touched only suggestively because 



Preface ix 

the limits of the volume could not admit of fuller 
treatment. 

My gratitude is offered especially to Professor 
Liberty H. Bailey, of Cornell University, to whose 
suggestion and patient attention the existence of this 
volume is due. 

GEORGE T. FAIRCHILD. 

Berea College, Kentucky, 
March 1, 1900. 



TABLE OF CONTENTS 

INTRODUCTION 

General Welfare, Nature of Wealth (pp. 1-19) 

PART I 

PRODUCTIVE INDUSTRY 

Analysis of Aims, Forces, Means and Methods (pp. 21-231) 

CHAPTER PAGE 

I. Aims of Industry 21 

II. Forces in Production of Wealth 27 

III. Labor Denned and Classified 32 

IV. Capital Defined and Classified 38 

V. Personal Attainments 45 

VI. Combination of Forces for Individual Efficiency ... 49 

VII. Methods of Association 55 

/"III. Exchange: Advantages, Limitations and Tendencies . 58 

IX. Value the Basis of Exchange 63 

X. Exchange — Its Machinery 109 

XI. Banks and Banking 140 

XII. Deferred Settlement and Credit Expansion 158 

£111. Technical Division of Labor 180 

QV. Aggregation of Industry 191 

XV. Special Incentives to Production 206 

XVI. Business Security 224 

(xij> 



xii Contents 

PART II 
Distribution of Wealth for Welfare (pp. 233-305) 

CHAPTER PAGE 

XVII. General Principles of Fair Distribution 233 

XVIII. Wages and Profits 239 

XIX. Conflict Between Wage-Earners and Profit-Makers 257 

XX. Proceeds of Capital : Interest and Rent. 279 

XXI. Principles of Interest 283 

XXII. Principles of Land Rent 293 

PART III 

Consumption of Wealth (pp. 307-371) 

XXIII. Wealth Used by Individuals 307 

XXIV. Prudent Consumption 312 

XXV. Imprudent Consumption 319 

XXVI. Social Organization for Consumption ........ 328 

XXVII. Economic Functions of Government 337 

XXVIII. Economic Machinery of Government 346 

Conclusion i 373-376 

Index 377-381 



ILLUSTRATIVE CHARTS 

i 

fUMBER PAGE 

I. Farms and farm stock since 1850 9 

II. Farm crops since 1850 11 

III. Labor and savings in progress of civilization ..... 52 

IV. Numbers of live stock and population since 1862 ... 83 
V. Acreage and yield of corn, oats and wheat 85 

VI. Prices of wheat, corn and oats, New York, 1878-98 . . 89 

VII. Annual fluctuations in prices of wheat, New York . . 92 

III. Prices of wheat in England, 1300-1900 94 

IX. Prices of hogs and hams, Chicago, 1884-97 96 

X. Prices of hogs and pork, Chicago, 1892-3, 1896-7 ... 99 

XI. Annual fluctuation of prices of pork, Chicago .... 101 

XII. Prices of cattle and beef, Chicago, 1884-97 102 

[III. Annual fluctuation of prices of cattle and beef .... 105 

IV. Prices of iron, steel, nails, kerosene, silver and farm 

wages, 1867-1896 107 



(xiii) 



RURAL WEALTH AND WELFARE 



INTRODUCTION 



GENERAL WELFARE 

Elements of welfare. — The welfare of communities, 
ike that of individuals, is made up of health, wealth, 
wisdom and virtue. If we can say of any human being 
;hat he is healthy, wealthy, wise and good, we are 
pre of his satisfaction so far as it depends upon self. 
When a community is made up of individuals kept in 
wealth and strength from birth to old age, sustained 
vith accumulated treasures, wise enough to use both 
strength and wealth to advantage, and upright, just 
ind kind in all human relations, our ideals of welfare 
ire met. 

These are four different kinds of welfare, each of 
vhich is essential, and only confusion of thought follows 
my attempt to treat them all as wealth, however they 
nay be intermingled and exchanged. Health is essential 
n gaining a full measure of wealth and wisdom, and per- 
haps in maintaining genuine character ; but a healthy 
ife gives no assurance of complete welfare. The facts 
ioncerning health in a community make a distinct sub- 

A (1) 



2 Rural Wealth and Welfare 

ject of study for promotion of welfare, and we call itf 
public hygiene. The science of education deals with] 
ways and means of securing public wisdom. The sci- 
ence of government includes all facts relative to public 
virtue. So the facts by which we know the nature 
and uses of accumulated wealth in any community make 
a distinct study under the name economic science; itl 
deals with certain definite groups of facts. To calli 
everything good "wealth" and everything evil "ilth" 
adds nothing but confusion to our thoughts. 

Mutual welfare. — Every human being in society is 
directly interested in the study of wealth as related! 
to his own and his neighbors' welfare. No one can 
understand his relations to those about him in the 
family, the neighborhood, his country and the world: 
without some understanding of the sources and uses- 
of wealth all about him. His very industry gains its 
reward by certain means in society depending upon 
economic principles. His motives for accumulating 
wealth have a distinct place. His uses of accumu- 
lated wealth are a part of the general facts which make 
wealth desirable. So the study of wealth in society 
must be everybody's study, if each wishes to do besti 
for himself or for his neighbors. In such study of I 
welfare every one finds his interests completely blended I 
with the interests of others. His existence is partt 
of a larger existence called society, from which he j 
receives himself in large measure and most of his^ 
satisfaction ; to which he contributes in like meas- 
ure a portion of its essential character and future 
existence. 



General Welfare 3 

The old idea that one gives up freedom of self for 
the advantages given by society has no foundation in 
fact, because we are born into our place in society with- 
out power to escape its advantages, disadvantages or 
responsibilities. The maxim " Each for all and all for 
each" is thoroughly grounded in the constitution of 
man ; his needs and abilities enforce society and insist 
upon community of interests. Even personal wealth 
confers little welfare outside of its relations to other 
human beings. The whole progress of the human race 
tends toward acceptance of the clear vision of Tenny- 
son, where 

"All men find their good in all men's good, 
And all men join in noble "brotherhood." 

Each stage in the progress of the conquest of nature 
to meet human wants, from the gathering of wild fruits, 
through hunting and fishing, domestication of animals, 
herding, and tillage of permanent fields, to the manu- 
facture of universal comforts and tools, and to general 
commerce, has made more important the welfare of 
neighbors. Even the wars of our century are waged 
in the name of and for the sake of humanity. The 
study of individual welfare involves the public wel- 
fare. Welfare of a class is dependent upon the welfare 
of all classes. Wealth of individuals is genuine wealth 
in connection only with the wealth of the world. Wel- 
fare without wealth would imply the annihilation of 
Jspace, of time, and of all forces acting in opposition 
to wishes. 

Wealth in farming. — The subject of the following 



4 Rural Wealth and Welfare 

pages is wealth, how it is accumulated, how distributed 
to individual control and how finally consumed for the 
welfare of all concerned. But special reference is made 
to the sources of wealth as a means of welfare in rural 
life, and to the bearing of definite economic principles 
upon farming, especially in these United States of 
America. Farming is, and must always remain, a 
chief factor in both wealth and welfare, and its rela- 
tions to the industry of the world grow more impor- 
tant to every farmer as the world comes nearer to him. 
We cannot now live in such isolation as our fathers 
loved. The markets of the world and the methods of 
other farmers all over the world affect the daily life 
of every tiller of the soil today. Commerce in the 
products of farm and household reaches every interest, 
when the ordinary mail sack goes round the world in 
less time than it took our immediate ancestors to go 
as pioneers from Massachusetts to Ohio. It seems 
possible to show from the experiences of farm life 
the essential principles of wealth -making and wealth- 
handling, including the tendencies under a world-wide 
commerce. These every farmer and laborer needs for 
his business, for his home, and for his country. 



* 



Nature of Wealth 5 

NATURE OF WEALTH 

Wealth defined. — If we look at the objects which 
men number in speaking of their wealth, we shall soon 
find the list differing in important particulars from the 
list of things which they enjoy. All enjoyable things 
contribute to welfare, but not all are wealth. Some, 
like the air and the sunshine, if never lacking, cannot 
be counted, because no storing against future need is 
practicable; but the fan that cools the air and the coal 
that gives heat are counted when they are stored as 
means of meeting future wants. If we could not fore- 
see wants of ourselves or of those dependent upon us, 
we could not gather means of supply for those wants. 
If we had all wants supplied at a wish or a prayer, 
we should have no incentive to store. The pampered 
child whose every wish is met has no clear conception 
of wealth or its uses. Let him be without a meal, and 
he seeks provision for the future by an effort to save 
what is left over from his last meal and by exertion to 
add to his store in anticipation of want. Thus wants, 
to be met only by exertion, are the foundation of the 
universal ideas of wealth, and whatever we have stored 
as a provision against wants becomes our wealth. If 
hunger were our only desire, our wealth would include 
only stores of food, conveniences for storing, means of 
increasing the store, and means of utilizing the articles 
to be eaten. Each desire adds to the range of articles 
Jwhich may enter our list of objects of wealth until enu- 
eration is impossible. None of these, however, will 
e stored as wealth beyond the limits of anticipated use : 



6 Rural Wealth and Welfare 

if so stored, they add nothing to the supposed wealth. 
An isolated family, able to consume only thirty bushels 
of potatoes in a season, is not more wealthy from having 
three hundred bushels stored: the wealth is measured 
by actual relations to wants not otherwise supplied. 
Even in a populous city, the three hundred bushels of 
potatoes become a store of wealth' only when other 
people need them and are able in turn to meet other 
wants of the owners. 

Indeed, we soon come to estimate any object of 
wealth according to its power, directly or indirectly, to 
meet the first want that comes. A cherished memento 
of friendship may be ever so gratifying, and yet find 
no place in our account of wealth, because it can serve 
no purpose in meeting other wants. 

Any object of wealth may cease to be counted, not 
because it has changed, but because wants have changed. 
The last year's bonnet goes for a song, because the 
fashion changes; the reaper rots behind the barn or at 
the roadside, because the harvester is wanted in its 
place. So the wealth in any object is limited by its 
relation to the present or prospective wants of its 
owner, and his control to meet these wants. The 
wealth of any community is its store of material ob- 1 
jects suited to the current wants or fitted to exchange 
with other communities for more suitable articles of 
use. We estimate it only by thinking of uses in pro- 
ducing pleasure or preventing pain, its limitations in 
quantity to a certain range of wants, and its control 
for use or transfer by an owner. 

Wealth distinguished from power. — Wealth is not to 



Nature of Wealth 7 

be confused with power of other kinds. Power may be 
for future exertion ; wealth is the result of exertion. 
Power may take any form of welfare, — health, wisdom, 
character, as well as wealth. So no personal abilities 
can be counted as wealth, however useful they may be 
as means of gaining it. Jenny Lind's abilities as a 
singer may have been better than wealth ; but exertion 
of those abilities in the United States enabled her to 
carry back to Europe wealth of which she had none 
before coming. The ingenuity of .Elias Howe exerted 
upon the sewing machine has been an immense source 
of wealth and welfare to the world, but it alone could 
not secure him daily food. Your words and my music 
combined in a song fit to tickle the fancy of the multi- 
tude may transfer wealth to our pockets, but it was in 
neither the words nor the music, nor yet in the song, 
and still less in the power to contrive them. If wealth 
in material things had not been in possession of the 
multitude, the same sweet sounds might have given 
satisfaction to the crowds without an idea of wealth in 
the transaction. Much of the welfare of the world is 
from exertion of powers entirely independent of wealth. 
The chief joys of home are not measured by the wealth 
in our tenement. The chief welfare of society is only 
incidentally connected with wealth. 



8 Rural Wealth and Welfare 

CHART NO. 1 
Fluctuation of Farms and Farm Interests since 1850 

At the top is shown the relative size of farms at the close 
of each census period, with the number of acres tilled and un- 
tilled. The lower part of the chart shows the changes in differ- 
ent farm interests, especially in the amount and character of 
capital employed and the number of people engaged in agri- 
culture. Assuming the conditions of 1850 to be par, the increase 
or decrease is shown for each kind of live stock, the number of 
farms, the total farm population, and the number of farm mana- 
gers, as well as the valuation of real estate and of live stock. 
To illustrate, take No. 4, the number of cattle, excluding the 
cows. In 1860 there were 1.5 times as many as in 1850. In 1870, 
on account of the consumption and disturbance of the war, the num- 
ber was reduced to 1.4 times as many. In 1880 there were more 
than 2.3 times as many, and in 1890 there were 3.48 times 
as many. In a few instances the estimate for 1897, though 
not an accurate enumeration, is added for comparison. A 
careful study of these various changes will show that while the 
total population in 1890 was only 2.7 times the population of 
1850, the total number of people employed in farm occupations of j 
every kind was 2.88 times as great; although the number of in- 
dependent farmers was only 2.28 times as great. The total value 
of real estate in farms was over four times as great, and the total 
value of live stock exactly corresponded. The number of cows, 
sheep and hogs had not kept up with the population ; while the 
number of beef cattle and horses and mules had increased much 
more rapidly. The fact that the value of live stock had increased 
in much greater proportion than the numbers shows that there 
has been great improvement in the individual character of the 
animals. That the average wealth of farm proprietors is more 
than three-fourths as large again is shown by comparison of the 
number of farmers with the value of the farms. That the num- . 
ber of mules, cattle and hogs actually decreased between 1860 
and 1870 indicates the enormous consumption of the armies in 
the Civil War. 




I. Showing the rate of increase in farms and farm live stock as compared 
with population. See explanation, p. 8. 



10 Rural Wealth and Welfare 

CHART NO. 2 
Progress of the United States in Farm Crops since 1850 

This chart indicates to the eyes facts shown by the census 
reports as to the relative increase or decrease of certain staple 
crops in comparison with the population. Assuming the condi- 
tions of 1850 to be par, the several lines indicated by numbers show 
the ratio of the several crops to the crop of 1850. Thus the wheat 
crop in 1860 was nearly .75 greater than in 1850; in 1870 it was 2.87 
times as great ; in 1880 it was nearly 4.6 times as great ; only a 
little greater in 1890, but in 1897 was nearly 6 times as great. 
It should be remarked that the census returns are founded upon 
the crop of the previous year, and therefore, will not exactly 
correspond with current estimates. At a glance it will appear 
that rye, buckwheat, sweet potatoes, sugar and rice have nowhere 
nearly kept up with the increase of population, while all the other 
crops have been considerably in excess. The barley crop could 
not be shown upon the chart for want of room, but is more than 
fifteen times as great. The cultivation of fruits is estimated to be 
twenty times as great, although the census returns give insufficient 
figures for accuracy. It is evident that the people of the United 
States demand a better living, as well as raise more profitable crops, 
than in 1850. Some striking illustrations of the effects of the 
Civil War are seen in the falling off of many crops during that 
period. Only oats, wheat and potatoes increased beyond the in- 
crease in population. Most of the others actually diminished ; 
and the staple products of the southern states prior to the war 
have scarcely as yet regained their previous standing. This is 
accounted for in part by the immense destruction of capital, but 
in larger part by the entire change in conditions of plantation 
cultivation. 



FARM CROPS SINCE 1850, U. S. CENSUS 
1850 1860 1870 1880 1890 1897 


4.00 

3.70 

3.40 

' 3.10 

2.80 

2.50 

2.20 

1.90 

1.60 

1.30 

1.00 
.70 


1. OATS, 


TIMES AS 


MUCH, 






5.51 


1 

6.10 

5.80 


2. WHEAT, 








4. 65 | 




3. HAV, 






3.76| 


/ 


4. CORN, 






3.57J 


5. COTTON, 






8.55| 


/ 


5.50 


6. POTATOES, 






3.31 1 


7. BUTTER, 




J 


P^i / 


/*v 


5.20 


8. TOBACCO, 




3.1 


F / 


9. POPULATIOI* 


, 


2.70 | 




/ 


4 90 


10. RYE, 


1.93 




11. BUCKWHEAT 


, 1.63 1 


1-2- 




4.60 


12. S. POTATOES 


J 1 ' 12 


13. SUGAR, 1.01 


| FRUITS, 20., 
BARUEY, 15.06 








4.30 


14. RICE, |. 60 








J 


y 


4.00 












3.70 












3.40 








1/^%/y 


^-J 


9 


3.10 




/ 






/^ 


2.80 




/ 


nJ^ 


vfy 




2.50 




/ 








2.20 




^ 


/ 1^ $/ 






1.90 


Ja 




Jfy </ 


^^ 




1.60 


wJ^ 




rs& . 


^^ 




'1.30 




f 'F^ 




^r. 




1.00 


~*Tfc 


sX 




^^ 




.70 



II. Showing the rate of increase in total crops for the given period. 
See explanation, p. 10. 



12 Enrol Wealth and Welfare 

Wealth in material objects. — Our attention is called 
to wealth in comparing two material objects of desire. 
One has more nses, more important uses, more rare 
uses, than another ; or one is less easily obtained than 
another. In either case we prize that one in store, as 
the more important. We compare two farms, as ma- 
terial aids to different owners, and call both wealth in 
different degrees. We note the condition of two coun- 
tries as to all the machinery of industry, and know that 
one has greater wealth than the other. We compare 
the accumulations of this generation with those of our 
fathers, and rejoice in our advance in wealth as one 
important form of power to gain a genuine- welfare. 
Thus, in comparing our country's inventory by the 
census of 1890 with that of 1850, we find that while 
its people are only 2.7 times as many, there are 3.15 
times as many farms of exactly the same number of 
acres, though more of each is cultivated, and that the 
value of property used in farming is more than four 
times as great ; so we know that the farmers have 
increased in wealth and welfare as compared with our 
fathers. See Charts I and II. 

Rural wealth analyzed. — A brief analysis of rural 
wealth in any established community will help to under- 
stand the meaning of the word and its relation to 
welfare. First may be named the farm fields and plan- 
tations brought by exertions continued through long 
years from raw forest or prairie to present tilth and 
productiveness. An English farmer, when asked how 
long it took to establish a certain permanent pasture, 
replied, "Three hundred years." Second, all fences, 



Wealth Analyzed 13 

drives and farm buildings, for convenience of handling 
and storing produce and stock. Third, all the tools 
and implements of the trade. Fourth, all domestic 
animals of every kind, and all attendants of their sus- 
tenance and growth, including feed and manure. Fifth, 
all contrivances for marketing and preparing for 
market. Sixth, all highways between neighbors and 
toward market. Seventh, all local elevators, stock- 
yards and depot facilities. Eighth, the homes, with all 
material comforts and utensils. Ninth, any store of 
provisions in cellar, pantry, smokehouse or bin. 
Tenth, all personal belongings for clothing, adornment 
and enjoyment. Eleventh, the family libraries and 
associated treasures. Twelfth, any actual store of gold, 
silver or other current wealth available for future 
wants. This does not include notes, mortgages, bonds, 
or any other promises to pay, nor certificates of stock 
in any business' enterprise, because these are mere 
titles to wealth supposed to exist elsewhere, — as distinct 
from the wealth as the deed is from the farm. Thir- 
teenth, airy peculiar advantages of location, scenery, 
pure air, pure water and agreeable temperature, that 
are controlled by owners for personal advantage or 
enjoyment, and can be objects of desire to others. 
Fourteenth, any "good will" attached to, and part of, 
particular farms, due to long established methods and 
facilities in preparing or marketing produce. If such 
" good will " is attached to a person rather than to the 
place, it is not wealth, but power. 

The last two are seldom distinctly enumerated by 
the assessor, yet they are clearly estimated in any 



14 Rural Wealth and Welfare 

exchange of places or transfer of titles. They are 
owned, nsed and transferred like other forms of wealth, 
and save future exertions to obtain them. All these 
are wealth because they contribute to welfare through 
being accumulated materials to meet future wants, and 
are to be measured in any estimate by their relation 
to the wants they will satisfy and the exertions they 
will save. 

Future tvants certain. — Wants and exertions are 
readily seen to be at the foundation of all ideas of 
wealth as indicated above. If we are uncertain as to 
the continuance of any wants or uncertain as to the 
conditions for meeting those wants, we stop accumula- 
tion of materials for satisfying them. Exertion stops 
unless the satisfaction to be gained by our effort 
is foreseen with a reasonable certainty. The farmer is 
never absolutely sure of returns for his labor upon the 
cornfield; but he is reasonably certain, and is abso- 
lutely certain that the crop will not come without labor. 
This assumed continuance of individual wants and 
their relations gives the grand motive for wealth gath- 
ering. 

The means of protection and support for physical 
life will be needed by ourselves and our children. 
Tools of better form and machinery of better manu- 
facture will be needed to reduce exertion in future. 
Reduced exertion for a given satisfaction will mean a 
fuller supply of things we are going to need still. If 
these wants are fully met, we are going to have leisure 
to satisfy larger and higher wants. It is the certainty 
that each advance of wealth will bring advancing wants 



Wealth and Ownership 15 

to consume more wealth, that gives a genuine motive to 
activity in gaining wealth, i. e., in accumulating the 
things to be used. The degree of uncertainty in all 
future plans leads to over-estimating the importance of 
gold, diamonds or any forms of wealth that can most 
easily be transferred between places or individuals, or 
be turned to account in each change of necessities. 

Oivnership. — The importance of wants and exer- 
tion emphasizes the importance of the individual self 
in all ideas of wealth. The ownership of one's own 
abilities and their products is absolutely essential to his 
care for accumulation, and that care is in proportion to 
his security in such ownership. Directly or indirectly, 
every exertion and every sacrifice must depend upon 
confidence that it will bring its object; but wealth- 
getting has no object without control, in some measure, 
of results. This fact makes individual ownership an 
essential to the highest exertion, a natural sequence to 
the right of liberty. 

Property rights are grounded in the general and 
individual welfare, as shown in human nature and in 
the progress of the world along the line of protection 
to property. Those communities are most happy which 
best protect individual property. As J. E. Thorold 
Rogers remarks, "Sacredness is accorded to private 
property, because society prospers by it." Even theo- 
rizers who denounce individual property -holding found 
their argument upon the equity of individual rights in 
property. War is less harmful than anarchy, because 
it ensures a measure of control. Slavery has some- 
times been less injurious than war in giving security to 



16 Rural Wealth and Welfare 

enjoy a portion of self. But a conquest of freedom by 
bloodshed is worth its cost in self-control. Civilization 
advances as individual responsibility for property, as 
well as everything else, is recognized. 

Christianity is ideally practical in upholding every 
man's right to self-control in the interest of all. It 
distinguishes equity from equality in distribution of all 
good, wealth included. Public property is rightly pub- 
lic when the wants and energies of all the community 
are best provided for by such common ownership. 
Proof in each particular case is essential against the 
presumption that individual needs are the best impulses 
to provision for welfare. Even common property is 
limited necessarily to the numbers who can use it. No 
property or wealth can exist for anybody without the 
control of some human individuals for whom it is 
accumulated. 

Wants individual. — We are likely to lose sight of 
the essential individuality of wants and exertions which 
make wealth possible, because in any community 
exchange of services modifies the direct relation of 
each man's wants to his accumulations. Assuming that 
others, wanting food, will exchange clothing for it, one 
man stores food alone, but in quantities far beyond his 
own need, measuring its relation to all his material 
wants through the wants and exertions of others. He 
feels even more sure of the continued activity of wants 
and powers among a multitude than if he had but one 
neighbor; but individuals, after all, must need his 
products and exert themselves to meet the need, or all 
his calculations fail. 



Progress in Welfare 17 

Progress in welfare. — Economic progress must show 
a larger welfare to individuals of the community. The 
familiar figure by which a commonwealth is compared to 
an animal organism fails to include the important fact 
that the individuals of the commonwealth furnish the 
only reason for the existence of the commonwealth 
itself, as well as its only means of existence. The cells 
of the animal, or even the most important organs, have 
no reason for existence in themselves. Each individual 
man furnishes the reasons for his activity, and the 
needs of individual men furnish the only reason for 
having a commonwealth. 

We can speak of progress, then, only when these 
individuals secure a better use of wealth in some way. 
tt may be by accumulation through saving from the full 
|ears for the empty, as older communities can endure a 
Irought with little suffering, while pioneers are ruined, 
[t may be by an increased product for a given exertion, 
is illustrated by every labor-saving implement upon the 
:arm or in the factory. It may be by lessening exertion 
"or a given product, as in the devices of kitchen and 
lairy to make tasks lighter. It may be in better distri- 
bution of the total product through readier and fairer 
exchanges of services or products, as happens with 
jvery improvement in transportation and every means 
! or fairer understanding in a bargain. Lastly, it may 
)e in more economical expenditure for common wants, 
is in maintaining government machinery. Usually, 
progress has been marked along several of these lines 
it once, if not all of them. There is reason in the 
tatement of Charles Francis. Adams that the last 

B 



18 Rural Wealth and Welfare 

century far exceeds the gain of a thousand years 
before. 

Production, distribution, consumption. — Full consid- 
eration of rural wealth as related to welfare must 
first give the principles upon which wealth is produced, 
including exchange with all its machinery ; for the 
marketing of produce is today one of the chief steps in 
securing wealth by farming. The thrifty farmer of today 
is the man of most business tact and energy, who uses \ 
most approved means of raising, handling and market- ■ 
ing his goods. 

It also requires a careful study of principles upon 
which any product of exertious, where more than one 
person has contributed toward the whole, can be fairly 
shared between the producers, however they have helped. 
A farmer is as thoroughly interested in problems of rent, j 
interest and profits, if not in wages, as any other worker 
for wealth or welfare. 

It further involves the study of economic uses for \ 
wealth, private and public, since no wealth has found 
the true reason for its existence till the uses to which 
it is put are known. This includes all questions upon 
the economic functions of government, the ends to be! 
served, and the raising and handling of revenues. If I 
any patriots need to know for what, how and in what i 
measure their country is dependent upon their own re- I 
sources, it is the farmers, whose homes make the bulk I 
of the land we love, whose children furnish the bone 1 
and sinew of industry, and whose interests are most sen- j 
sitive to misdirected energy in public administration. 

Security in stable government. — Agriculture, of all 



Security in Stable Government 19 

ndustries, can nourish in that country alone where per- 
sonal and property rights are fully understood and 
'espected, where claims are equitably adjusted by a 
stable government, and where taxes are properly appor- 
tioned and revenues economically expended. 



PART I 

Productive Industries : Analysis of Aims, Forces, 
Means and Methods 



CHAPTER I 

AIMS OF INDUSTRY 

Production defined. — A very little thought shows 
:hat men produce nothing in the sense of creating. 
Ml production is simply overcoming obstacles to satis- 
faction of wants as we find these obstacles in space, 
;ime and form or substance of natural objects. In 
ioing this we are confined to mere ability to move 
hings. The very highest effort of man's energy today 
put proves the saying of Lord Bacon, "All that man 
san do is to move natural objects to and from each 
>ther : nature working within accomplishes the rest." 
?his is fully illustrated in farm operations. The bring- 
ng together of soil, seed, sunshine and shower, accord- 
ng to their natures, secures the product of nature — a 
rop. Moving food and water to the steers, or the 
teers to food and water, under proper conditions of 
rarmth, air and exercise, produces beef. To know how 
nd when and where to move things so that nature may 
leet our wishes by what always happens under the 

(21) 



22 Rural Wealth and Welfare 

same circumstances, would be to have all the arts of 
life ; in short, production is the art of moving things. 
But we distinguish different kinds of production accord- 
ing to the direct results expected from our motion, as 
reducing space and time, modifying the form, or chang- 
ing the substantial qualities of things handled. 

Transportation in production. — The change of place 
necessary to bring together wants and those things 
which satisfy them is a method of producing wealth 
most apparent everywhere. The bringing of wild fruits 
from the forest or the swamp to the home gives them 
worth. The mere transportation, change of place, gives 
them an importance they did not have on the trees or 
bushes. In this transportation we put the energy neces- 
sary to take grain from the fields all the way to the 
bake -ovens, and finally to our mouths, or to carry the 
milk from the stable or yard in pail, can, wagon, train, 
delivery cart and bottle, to the lips of the child whose 
life it maintains. Every kind of material or force ex- 
pended in this process of overcoming space is used in 
the idea that the object is worth the expenditure in the 
place finally reached. If the motion stops anywhere 
along the way, the wealth is not obtained, or at least 
is held only in expectation until the motion can be com- 
pleted. While each of fifty individuals may give a hand, 
and pass his claim to the next for a consideration, the 
wealth is all the way increasing in anticipation, as the 
object comes nearer its use. 

In this progress time as well as space is an impor- 
tant obstacle to be overcome, and we employ all means 
of increasing speed, or preserving against what we call 



Production of Wealth 23 

"the ravages of time," i. e., the operation of injurious 
forces acting in time upon most material substances. 
The methods employed for storing, curing and forc- 
ing to maturity the various forms of food needed in a 
community are aimed at meeting this obstacle, and add 
to its final worth ; indeed these may be the means of 
giving value to all the other efforts in transportation, 
as in moving beef from Kansas City to New York, or 
fresh fruit from San Francisco to Boston. 

In the same process of putting things where they are 
needed, all merchants are engaged. Without the store, 
the order upon the shelves, the ready attendant and his 
despatch in meeting your demand, the pounds of sugar 
or salt essential to your comfort could not be had for 
love or money. These efforts are an essential part in 
the motion between wants and objects to satisfy them. 
Much of this kind of motion we include under the 
name commerce, though that word more directly im- 
plies the exchanges involved. The machinery of com- 
merce is chiefly the means of bringing things wanted 
to the people who want them. 

Much, however, of the exertion required in all in- 
dustries, especially in farming, is simply "to fetch and 
carry." It will emphasize this fact to study, while you 
eat a piece of cherry pie, the processes involved in 
bringing it from the treetop, grainfield, dairy and cane- 
field, through mill and store and pantry and oven, to 
your plate. Transportation cuts a tremendous figure 
in production of wealth. In the first stages of social 
life it is almost the whole. The hunter talks of "bring- 
ing in" his game. Australians, Hottentots and Digger 



24 Rural Wealth and Welfare 

Indians lived by carrying themselves from one supply 
of food to another. 

Transformation in production. — Much of the ma- 
terial gathered by us needs some change of form to suit 
our wants. An ax -helve has in it the original wood of 
the young hickory brought from the forest, but its 
form is fashioned by effort with ax, drawshave, 
scraper and sandpaper, until it satisfies the judgment 
of an expert chopper. This transformation is employed 
in any industries where wood, ivory, the metals and 
other minerals are shaped by tools, or by molding, or 
pressing or bending, to our wishes. Most fabrics are 
materials put into form. The word manufacture covers 
most of such work where materials are manipulated by 
shaping; but it also includes many operations with a 
different aim, to change the substance itself. 

Transmutation in production. — Men have found that 
two metals, tin and copper, melted together produce 
brass, different in qualities from either. Farmers have 
for many centuries contrived, by keeping nature's forces 
under control in the wheat field, to combine certain 
elements of the soil, including its moisture, into grain. 
The single seed has multiplied a hundredfold through 
being placed in favorable conditions, with the raw 
materials at hand in the fertile soil. 

The process of maintaining animals with suitable 
food for the production of milk or flesh is similar. The 
combination of flour, water, salt and yeast, by heat, 
first mild and then intense, into a loaf of bread is a 
good illustration of a change of qualities by rearrange- 
ment of the elements of a substance. It is sometimes 



Forms of Production 25 

called transmutation, and comes the nearest possible to 
creation of material things. The chemist's laboratory 
exists for making such new combinations, and many of 
the arts produce materials, like steel, which would not 
exist without such combination. But many have seen in 
the art of agriculture a most prominent illustration of 
transmuting coarser elements into products adapted to 
human wants for food, shelter and adornment. All 
such work, however, is done by bringing objects and 
forces into such contact that chemical or vital changes 
will take place while we wait. 

Production extended. — In all these three directions, 
or in any combination of them, transporting, trans- 
forming and transmuting materials, men seek the pro- 
duction of a supply for meeting anticipated wants, and 
so contribute directly or indirectly to welfare. No one 
way of producing what men need, where they need it, 
and when they need it, has any superior claim to the 
name production. All are making the material yield up 
welfare to the one who needs it, and produce wealth just 
so far as their services are necessary in bringing the 
welfare. If ever any step in the process becomes use- 
less, it ceases to be productive of wealth and becomes 
waste. The inventive powers of mankind are always at 
work to shorten the processes and hasten the advan- 
tages of production. Men study the minutest workings 
of nature to find the conditions under which she does 
her part of the work. The application of such minute 
knowledge is a chief part of every art. This is also the 
object of science; for, as Guizot says, "It only began to 
have a well defined existence when it confined itself to 



26 Rural Wealth and Welfare 

seeking the 'how' rather than the 'why' of nature's 
workings." This purpose sustains in the United States 
more than fifty agricultural experiment stations, united 
in a great organization, to find how the natural forces 
used by farmers do their work. 

This prophecy of a noted economist is warranted: 
"Probably the greatest economic revolution which the 
youth of today ma3 T in his old age behold, will be found 
in this all -important branch of our industries." When 
we know how nature works, we can adjust our little 
motions in time and place to promote that work; we 
shall have the art of moving things to suit our needs. 
Nothing can be truer than Tennyson's line, "We rule 
by obeying nature's powers," 



CHAPTER II 

FORCES IN PRODUCTION OF WEALTH 

Nature. — When men learn to meet their wants by 
exertion in accord with nature's ways, they are said to 
use the forces of nature in production of wealth. .Every 
accumulation of materials for satisfying future needs 
implies some control over natural objects. If advantage 
is taken of natural motions or other activities to bring 
about larger accumulation, the man whose plans secure 
this has gained control over, and so property -rights in, 
the natural force which he has harnessed. The wind 
caught by a sail and the water controlled by a dam con 
tribute to the power, and indirectly to the wealth, of 
the man who contrives to make them move things for 
him. The directive actions of men necessarily appro- 
priate the natural objects which they use, together with 
all the qualities of those objects. 

Energy. — Human exertion produces wealth, as we 
have seen, whenever it anticipates and provides for 
future wants by securing at hand the things to be 
used. So far as this anticipation includes control of 
forces or qualities in nature, these natural agencies 
contribute to wealth of individuals or communities. So 
voluntary human exertion is combined with involuntary 
forces of outside nature to give wealth. No amount of 

(27) 



28 Rural Wealth and Welfare 

gold in Alaska is wealth until some human ability has 
appropriated it to human uses; but the mere fact of 
locating a claim for mining purposes gives the pros- 
pector advantage over any other man because of his 
foresight. So every activity of nature may become a 
factor in wealth by human ingenuity in making it 
useful. 

'Natural forces. — Such natural agencies for pro- 
ducing wealth are seen in the simple properties of mate- 
rial bodies, such as the metals or woods or grains or 
fruits or flowers possess. We secure these properties 
for our uses. Gravity, sound, heat, light, electricity, 
chemical affinity, crystallization, even life itself, are 
names for certain forms of energy in nature which men 
are using more or less to meet their wants. Whenever 
exertion is needed to provide for using these, the 
thought of wealth is connected with the forces them- 
selves. The fish in the sea and rivers become wealth to 
one who has caught them, and even more distinctly the 
property of the community which has protected them in 
breeding. Sunlight may reach all alike in welfare, but 
the man who has contrived to make it print pictures for 
him has made sunlight into wealth in the picture. 
Equally so the farmer's energy and contrivance use the 
properties of soil and climate and the vital energies of 
seeds to make wealth in a crop. 

Control for welfare. — As each individual worker 
gains control over any of these properties or forces he 
advances in wealth and welfare. It becomes his own 
means of meeting wants. If all individuals in a com- 
munity share in such control, they think of the good 



Forces in Production 29 

things as part of the general welfare, and do not 
enumerate them in anybody's wealth except when 
comparing their own condition with that of another 
community. Advantages of this kind constantly tend 
to become more universal, and so to count very little 
in individual wealth. Many advantages of civilization 
today belong to all the world alike, so that nature 
seems to meet our wants gratuitously; but the story of 
progress shows that these are gifts inherited from the 
wealth of past ages. The human exertion which they 
once cost is overlooked in the ease of the present. 
Mere fire was once a treasure to be cherished and kept 
at much expenditure of strength and foresight. Now 
we kindle a fire so easily that nobody thinks of it as a 
part of the world's wealth. 

Land as a force. — Land represents a combination of 
natural energies and properties so important as to be 
named sometimes as a distinct force in production. It 
implies, first, needed space for various kinds of exertion 
in both country and town. Second, it includes all min- 
eral, vegetable and animal bodies that are found above, 
on or under the surface. Third, it is soil, an essen- 
tial part of a farmer's equipment in using nature's 
processes of growth. 

As most of these properties of land can be put to 
use only by repeated and continued exertion in the same 
place, a large portion of the earth is necessarily appor- 
tioned to individual control, i. e., to the ownership of 
those who can direct its uses, and so it becomes wealth. 
The sea in most of its uses to men requires no such 
local control, and so is not owned by a nation even; 



30 Rural Wealth and Welfare 

but the harbors, ships and wharves, the oyster-beds 
and fishing banks, soon become the property of some 
body of men that will make and keep them useful. 
Even a pathway over the high seas may yet be con- 
trolled for the safety of the huge steamers that dash 
across. 

Land, except when used for absolutely universal 
welfare, must be under individual control, and even 
then other individuals may have the right of way 
because of its necessity in the common use. Peculiari- 
ties of property in land arising from limitations in 
quantity or quality will be spoken of under Scarcity 
Prices and Bent. They differ from similar questions as 
to any other form of property only because this form of 
property seems more permanent. Any force of nature 
brought under control by individual effort contributes 
to wealth of individuals till all gain equal control. 
Peculiarities of climate affect the quality of wool, cotton, 
grains and fruit, and even the beef and mutton raised 
under it. But these effects we connect with the land. 
Such peculiarities also affect manufactures of various 
kinds, and so location has value. 

Effort for gain. — Voluntary human effort is always 
made with the expectation of gain from its exertion; 
otherwise it would not be made. As Guizot says, "Our 
ideal is to procure the maximum of utility with the 
minimum of effort." The exertion is always counted in 
the cost of any product, whatever the natural forces 
employed. If the crop fails, or the product is 
unsalable, the effort has lost its expected reward, and 
prospective losses are estimated with more or less care 



Forces in Production 31 

in judging whether a product is worth the exertion. The 
half crop of a droughty year costs as much as the full 
crop of a plenteous year, and compensation for the loss 
is expected from the surplus of the full crop. 

In estimating the exertion given, all human energies 
are counted, whether they belong to the present, like 
muscular power, good eyesight, quick intelligence; or to 
the past, like dexterity from training, superior knowl- 
edge, accumulated tools, established character. If the 
immediate exertion is most prominent, the word labor 
includes the whole exertion. If tools and machinery 
are used, capital is a contributor to the product and 
takes its share. If skill or knowledge or character 
become important, personal attainments are a chief 
cause of the product, and so a chief claimant in the 
reward. 



CHAPER III 

LABOR DEFINED AND CLASSIFIED 

Labor defined. — Exertion of any kind for meeting 
individual wants we call labor, whether it simply gathers 
food from the forest, or contrives the most intricate 
machinery for satisfying wants that may take years to 
grow. Exertion that has no end beyond itself, no mat- 
ter how severe it may be, we call play, and consider it 
important in public welfare only as it aids in health and 
morals. Labor is separated, too, from all exertions to 
destroy or injure the welfare of others, if we can see 
their object. /Any person claiming to labor professes to 
have given his exertions for the satisfaction of some- 
body's wants without doing violence to the welfare of 
others in the community^ Whenever we do not assume 
this we concede a state of war, violence and destruction 
taking the place of production and accumulation. These 
may require exertions usually classed with labor; but 
are punished instead of being rewarded, unless we can 
establish their final advantage in a larger welfare for 
humanity, or in defense of society. 

Productive labor.— The various classifications of 
labor serve merely to call attention to peculiar relations 
implied in the results. If exertion results in giving ad- 
ditional wealth, or power to produce wealth, it is called 

(32) 



Labor Defined and Classified 33 

productive labor ; but if it contributes only to im- 
mediate comfort or pleasure or safety it is called unpro- 
ductive. The distinction is useful so far as it enables 
us to be prudent in adjusting energies to meet real 
wants. All labor is maintained by the product of exer- 
tions. Any labor expended without a product must be 
provided for by an increased product from some other 
form of labor. A farmer may sustain life upon the 
food he raises ; but the wife who makes his house a home 
cannot live on the product of her labors. She may add 
to the value of some products directly, as in turning 
milk into butter, and raw materials into palatable food; 
but her chief energy may be in getting satisfaction for 
the household out of materials gained by her husband. 
Both are essential to the welfare of either, and prudence 
requires a proper adjustment between them. A force of 
physicians may be needed to keep a community in work- 
ing condition; but if a whole community tried to live as 
ioctors some other community must furnish the ma- 
terial wealth to sustain them. 

Any increase of labor upon material products, either 
lirectly or indirectly, may increase ability to meet future 
ivants, while increase of labor upon present uses of 
wealth may diminish ability for the future. The wealth 
)f a community is the product of all the labors that 
jiontribute to make material nature useful. This classi- 
fication is important in studying the question of produc- 
tive consumption of wealth, but does not decide which 
jives best results. It is a serious error to assume that 
ihe worker, whose labor is directly applied to materials, 
>ives to our wealth all its value. If several men are 



34 Rural Wealth and Welfare 

building a house, one may contribute as much to the 
building by cooking for the rest as if he worked in turn 
in the construction. In the same way all the household, 
if well ordered, aid toward the result of their united 
labors. The physician who shortens the illness of a 
farmer contributes his share toward raising the farmer's 
crop. The lawyer who makes property safer, and the 
minister who gives stronger motives for exertion, are 
sharers in the force that brings the product. 

Physical, mental, moral labor. — The classification of 
labor according to the powers employed serves to call 
attention to the wide range of exertions rightly classed 
as labor. If the exertion is chiefly muscular, labor of 
hands, shoulders, legs or any part of the body, it is 
properly called physical. If the main effort is that of 
the intellect in planning, inventing, contriving ways and 
means, or in remembering, counting or thinking of any 
kind, it is just as truly labor, but mental. If the chief 
exertion is in the good will that resists temptations, 
guards interests, controls violence and folly, secures 
order and devises liberal things for society, the labor 
is moral. Moral labor is often recognized in wages, 
faithfulness being more important in some services 
than in others, and paid for. Mechanical devices for 
promoting honesty or watchfulness may save, in part, 
moral labor. 

This view of labor helps us to see the wide range of 
efforts that unite in production of wealth, since all the 
energies of a man may be employed in his work. The 
successful farmer is one who makes the most of all his 
abilities — his muscles, his mind and his heart — and 



Labor Classified 35 

his hard work is far from being confined to his hands. 
The three kinds of labor are combined in some propor- 
tion in every life, bnt the best and most productive life 
has most room for hard thinking and self-control. 

Operative, executive, speculative labor. — In the advanc- 
ing complexity of society a still more important classifi- 
cation of labor is apparent. If a man's effort of any 
kind is simply to follow directions in an established 
routine, it is called operative labor, and the laborer be- 
comes an operative. He works usually by the day, 
hour or piece, under a foreman or overseer. Beyond 
the task set for him, he has no thought nor will. Over 
him is a director — the foreman, overseer, contractor or 
boss — whose chief effort is to carry forward to comple- 
tion some plan committed to him as a trust. The fore- 
I man's labor is largely mental and moral in adjusting 
tasks and keeping the operatives, "the hands," well em- 
ployed. This is well named executive labor, and re- 
quires peculiar abilities and character. 

Still farther away from the mere task is the effort 
that devises the plan, adjusts part to part, decides upon 
materials suitable for each part, establishes the ideal of 
[excellence for every part and for the whole, and foresees 
its actual uses. Invention of every kind illustrates the 
exertion of foresight in planning, but such exertion is 
not confined to technical invention. / The farmer who 
lies awake nights to plan his year's work so that he may 
have the largest returns for his undertakings in market- 
able products, gives the same kind of effort as the in- 
ventor. A good name for this is speculative labor, — 
an exertion to foresee and provide for future needs of 
society. "\ 



36 Rural Wealth and Welfare 

In much of farm life all these are mingled : the 
same man devises the plan, executes his own ideas, 
and performs the tasks himself. But every one realizes 
the difference of success growing out of the planning. 
Many a good man needs to follow another's plans, and 
not a few " work better for others than they can for 
themselves." In some great undertakings the projector 
and planner, the contractor and overseer and the worker 
of details are necessarily separated. This may be well 
illustrated in the construction of a great building, for 
which an architect gives all attention to a plan, and may 
require a considerable force of assistants and draftsmen 
to embody his ideas on paper; then contractors, one or 
several, secure material, employ men and direct them 
in placing materials in form and combination to suit the 
plans; but a host of workmen move as directed at the 
will of a foreman to pile brick, mortar, stone, iron or 
timber according to the plan. The labor of the archi- 
tect makes possible the entire structure — makes the 
work for all that enter into his labors. 

This classification into speculative, executive and 
operative labor helps to a fair estimate in sharing the 
proceeds of combined labors, and gives a proper impor- 
tance to the inventive and foreseeing energy which causes 
the growth of civilization . /That form of exertion which 
has clone most to meet the world's wants is speculative 
labor. 

Invention in farming. — A capital illustration of 
speculative labor, productive in the highest degree, is 
the invention of reaping machinery. The inventor has 
gained riches by his contrivance, but the world has 



Labor Classified 37 

gained far more by his foresight and ingenuity. Simi- 
lar energy has been put into all labor-saving machinery, 
and still plays an important part in devising the best 
uses for it. 

Every farmer has a similar need of planning for 
every field he plows. There is a certain draft for each 
horse, a certain speed for the plow, a certain adjustment 
of harness to the team, which gives a full return for the 
force employed. A failure to find this causes waste. 
All the effort of scientific research into causes and con- 
ditions of growth or disease of plants and animals is 
speculative labor, out of which the next advance of 
agriculture must come. The mere operative power of 
a laborer can be supplanted by brute force or by ma- 
chinery, but nothing can ever supplant the intelligent 
foresight that invents, plans and devises the end to be 
reached, and the ways and the means for reaching it. 

The very foundation of any success in farming is 
clear foresight and distinct planning for a succession of 
crops, each to be tended, harvested, stored and marketed 
in the very nick of time. The best energy of every 
farmer is property given to finding what crop to raise, 
how and when to have it ready for the world that is 
going to need it. He best meets his own daily wants 
when "Mr. Contrivance" stands by him in all his efforts. 
This contrivance is the chief exertion of a successful 
farmer's life.X 






CHAPTER IV 

CAPITAL DEFINED AND CLASSIFIED 

Capital distinguished from wealth. — Whenever ma- 
terial wealth is used not directly in meeting present wants, 
but to produce more wealth suited to future wants, it is 
called capital. Any store of good things devoted only 
to meeting wants as they come is thought of as wealth, 
as well as possible capital, since at any time it may be 
made the means of creating other wealth to more than 
take its place. The distinction grows wholly out of the 
uses of wealth, not its forms. A horse used, or to be 
used, as a force in production by drawing loads is 
counted as capital; but if used for mere pleasure-riding 
is only wealth, which leaves no material return when 
consumed. Thus the same horse may, in the hands of a 
breeder, a trainer, or a liveryman be capital, but in the 
hands of a fancier or a pleasure seeker be only wealth, 
to be used as wanted. 

Wealth in dwellings or public buildings constructed 
for enjoyment rather than protection of a working com- 
munity is not capital, and may be destroyed by fire or 
storm without serious disturbance of industry. The loss 
is bravely met, the hardship endured and extra energy 
put into restoration. A farmer may lose a fine house 
and by living in less comfort for a time restore it, while 

(38) 



Capital Defined 39 

the loss of his teams or his barns may cripple his 
industry. In the great Chicago fire of 1871 the wealth 
destroyed is estimated at $50,000,000, while the loss of 
actual capital may have been only $5,000,000. An 
energetic use of the capital remaining wrought ap- 
parent wonders in the restoration of wealth. Indeed, 
the total capital of our country is supposed to be only 
three times the annual product of industry, though 
a century of labor could not restore it if destroyed 
entirely, because effective tools would be wanting. 

The capital of an individual is such a portion of his 
wealth as he is using to maintain and increase his 
wealth. The capital of a country includes all the farms, 
so far as they are made such by improvements directly 
or indirectly, including all ways and means of communi- 
cation and transportation, for roads contribute to all 
goods drawn over them ; all buildings devoted to systems 
of production, including necessary protection of laborers 
themselves ; all tools, machines and contrivances for 
power; all animals employed in connection with in- 
dustry; all materials of construction or growth; all ma- 
terials consumed in securing and maintaining power, as 
fuel, lubricating oil, etc., or in performing operations of 
manufacture, as dye stuffs; subsistence for the workers, 
the brutes they use, and the families which keep up the 
life and comfort of the people; the necessary stock in 
trade, that all wants may be readily supplied ; all the 
machinery of trade for ready transfers, including any 
actual wealth in form of money; all the governmental 
machinery for protection and maintenance of order, as a 
first essential to wealth -producing. 



40 Rural Wealth and Welfare 

All these are more simply grouped in their different 
relations to labor under three classes: first, as sustain- 
ing labor by food, clothing, protection and material on 
which to work; second, as aiding efficiency by tools, 
machines and stored up forces; third, as stimulating 
exertion by reducing present anxieties and arousing 
more far-reaching plans for future undertakings, illus- 
trated by possession of satisfactory stocks of goods or 
comfortable homes for families. 

Capital a time- saver. — All these forms of wealth serve 
in production by extending the possible waiting between 
an effort of any kind and the greater satisfaction secured 
by it. No community could begin farming as a busi- 
ness until it had secured housing and seeds and tools 
and provisions in some form for most of a year's suste- 
nance. All the capital that constructs a great thorough- 
fare is used in getting ready to satisfy wants in many 
future years. Capital furnishes subsistence for laborers 
of every kind during those years of waiting for a prod- 
uct. This is true capital, because the object of its use 
is a greater product of wealth ; but the product may be 
long delayed. So all accumulated wealth in every form 
represents sustained labor during the past. Professor 
Taussig estimates the accumulation of subsistence in all 
existing goods at five years of labor for the community. 
The total value of farms in our country is just about 
five times the average annual product of the farms, 
though a large portion of the land is unused. 

Capital circulating or fixed. — A further distinction is 
desirable between capital in food, fuel or stock in trade, 
which may be turned at a single use into new wealth, 






Capital Classified 41 

and capital in buildings, bridges, roads and farms, 
which may be used many times in adding new wealth 
before they entirely disappear or give place to new 
forms of capital. The first is called circulating capital, 
and the last fixed capital. 

The degree of permanence in fixed capital is indefinite 
of course— even drains vary in permanence — and the line 
between the two is not always easily drawn, yet the dis- 
tinction is real. Most men distinguish " the plant" in 
any enterprise from "the current supplies," and realize 
that some fit proportion, exists between them. A farm 
well equipped can not be handled to advantage without 
a proportional investment in current supplies. Many a 
renter cannot pay his rent for want of means to work 
his farm profitably. If the farm were given him, he 
would still be hampered by the same lack of consumable 
goods to turn at once into larger products. Many a 
i land poor " farmer would gain at once by exchange of 
acres for more "current supplies" for his farming, such 
as food for help, feed for teams and stock, seed or ferti- 
izers for his crops, or young stock to consume the raw 
product of his fields. In the fourteenth century the 
stock of European farms was worth three times the value 
Df the farms. Similar conditions are found now in some 
tiewer portions of the United States. It is impossible 
o estimate exactly the existing ratio between fixed and 
circulating capital from statistics at hand. Farmers in 
)lder, more developed regions can use, without suffer- 
ng, a larger per cent of fixed capital than pioneers can, 
pecause the circulation is more rapid. For the same 
eason the raising of staple annual crops gives place to 



42 Bared Wealth and Welfare 

double cropping, dairying and full feeding as land 
grows more valuable, frequent returns serving instead of 
large circulating capital. 

In general, the wealth of a community is better judged 
by its fixed capital, while its thrift is known from its 
circulating capital. Fixed capital is always secured by 
consumption of circulating capital. The extension of 
railroads always 'implies great reduction of ready sup- 
plies. Money between individuals and communities ranks 
as circulating capital, but within any community the 
stock of money needed for domestic trade may be 
thought of as a permanent machine. Even machinery 
may be circulating capital in the hands of one who 
manufactures or sells it, though fixed when located in 
its work, and for the whole community is "fixed' 7 as 
soon as its destined use is determined by its form. Thus 
the distinction, though real, is flexible. Its importance 
in discussing the industries of a country, or in under- 
standing the relations of various industries to each 
other and to the world, will appear later in the book. 

Capital unproductive. — Capital is sometimes said to 
be unproductive in contrast with productive, although the 
very nature of capital requires productiveness. The 
occasion for this distinction is in the fact that means de- 
voted to future production of wealth in a particular way 
may be years in returning the product; the destination 
is evident and the return confidently expected, yet the 
owner is without income or near prospect of income. 
Such ventures are seen in the reclaiming of waste lands 
by drainage, the equipment of extensive mines, and the 
construction of dykes and levees. Land held for sale 



Farm Capital 43 

or use in the indefinite future is a most common illus- 
tration of unproductive capital. 

If wealth in some readily exchangeable form is in- 
tended for productive use, but is held for a satisfactory 
opportunity, it is sometimes called free or floating capi- 
tal. It may be available for any temporary use, and so 
afloat among a variety of investments. Some great en- 
terprises, like the building of the Suez canal, are begun 
in view of attracting floating capital. Borrowers gen- 
eral^ look to such accumulations for their supply 
of funds. 

Capital in farming. — A clear view of the uses of 
capital may be gained from estimating the needs of a 
young farmer just starting out for himself. For all his 
equipments he must depend upon the time and effort of 
somebody embodied in form of tools, material and 
.sustenance, for capital in any form is simply this. A 
farm of 160 acres improved, or already out of the crude 
pioneer stage, represents about ten years of one man's 
time, say $3,000. A house suitably furnished for him- 
self and his young wife means three years of time, 
$1,000. His barns and corrals and intersecting fences 
cost two years of time, $600. His team and stock and 
the necessary tools make nearly three years of time 
again, $900. Seed, feed, provisions, clothing, insur- 
ance and wages for help, all to be used before his first 
[year's crop is sold, require at least $500 worth of time, 
or nearly two years more. The needed capital for such 
a farm thus represents full eighteen years of the time of 
an able-bodied man, or $6,000. If we add to this the 
cost of bringing to mature age and intelligence the three 



44 Rural Wealth and Welfare 

able and efficient workers needed to manage and work 
that farm, we shall credit the past, without counting the 
time and energy of the young people themselves in 
growing and learning and gaining their skill, with thirty 
years of labor, $10,000, put into the farm and its occu- 
pants as they stand ready for a year's work. This ac- 
cumulation is likely to show all the forms of capital 
described. 

Capital conservative. — Capital, especially in fixed 
forms, being in its nature the conserving of energy, is 
necessarily an incentive to conservatism in society, since 
any great and sudden changes in the habits of a com- 
munity involve rapid consumption or destruction of 
capital. Capital is said to be "timid." This statement 
means simply that all owners and users of capital who 
realize the time required for accumulating it hesitate to 
risk its destruction in doubtful enterprises, uncertain ' 
confidence or venturesome experiments in goverment or 
financiering. War, riots, or even revenue laws, may 
destroy fixed capital that has been the growth of a cen- 
tury. A small change in tariff laws has rendered use- 
less immense factories. For the same reason farmers, 
having so large a fixed capital in farms and farm ma- 
chinery, do not take kindly to political changes involving 
doubtful consequences. States where the capital is still 
circulating may readily venture upon experiments finan- 
cial or political, since little time is lost even in destruc- 
tive results. People in new countries take risks readily 
because they have less to risk. 



CHAPTER V 

PERSONAL ATTAINMENTS 

Accumulated energies. — The force accumulated 
through personal effort in training, education and 
discipline is similar to capital in the fact that it rep- 
resents a period of time between the effort and its full 
accomplishment, and that it is devoted to production 
of wealth. It differs from capital in being immaterial 
human energy, exceedingly useful in combination with 
capital, but a part of the laborer, not his tools. It 
is gained by devoting time, attention, thought and 
practice to acquiring methods of greatest efficiency in 
any act of labor. It requires surplus energy in labor at 
any task to gain, not only the material result, but 
power to do the same task better and more easily next 
time. All the time expended in acquiring such powers 
s put into the value of what is finally produced. Any 
peculiar tact or ability developed becomes an essential 
Dart of individual powers, and its product, like that of 
my form of exertion, becomes the property of the in- 
lividual. 

In this way, not only is the cost of gaining skill 

for education, or of establishing habits, returned in 

;he product, but often a considerable increment, or 

jain, from the larger demand for such abilities. A 

(45) 



46 Rural Wealth and Welfare 

skilled artisan's labor meets more urgent demands for 
its use. 

y Skill. — If this extra exertion takes the form of train- 
ing muscles, nerves and brain to act with speed and 
accuracy as judgment directs, we call the attainment 
skill. Even if the action required is simple, dexterity 
comes only by practice, and in special cases may multi- 
ply the product many times. Two men may shear sheep 
with equal accuracy, but one has three times the speed 
of the other. His skill secures employment at three 
times the wages of the other, with profit to the em- 
ployer, because the extra speed saves room, attendance 
and risk over employing three men at one-third the rate. 
The shearer profits by the rarity of his skill in getting 
the wages of three men, with the support of but one, and 
in more constant employment. When the operation is 
more complex, and success involves larger interests, 
skill counts indefinitely more, and as society grows 
complex the room for exercise of skill becomes larger 
and more varied. The wide difference between pioneer 
farming and market -gardening illustrates this. The 
history of agriculture shows the slow development of 
skill in the furrow, the ditch and hedge, and in the 
handling and breeding of stock. Farmers once barely 
scratched an acre a day with their rude plow and were 
long in learning the use of a harrow. No attempt, ac- 
cording to Professor Rogers, to improve the breeds of 
cattle and sheep appeared before the eighteenth century 
in England. Most early improvements in farming skill 
came from the industrious monks, whose intelligence 
fostered skill. 



Personal Attainments 47 

The advantage given by skill perpetuates skill from 
generation to generation through aptitude and superior 
training, and so the people of a neighborhood or a 
country may inherit such power in contrast with other 
regions. "Yankee ingenuity" has become proverbial 
through such natural extension. 

v Discipline. — Education serves the same purpose by 
acquisition of knowledge in such ways as to give wisdom 
in its application. It involves an exercise of intelli- 
gence to the establishing of sound judgment. Broader 
than skill in its range, it increases the possibilities of 
skill as storage of power. \ The skill of the surgeon 
would never have existed but for the brightening of his 
intelligence by education. The electrician's training 
depends upon a broad foundation of education in 
knowledge of the matters he handles so dextrously. In 
farming, this source of stored up power has until very 
recently been ignored. While men in many professions 
were multiplying their individual power by spending 
youth in school, the farm boy would be simply trained 
at the plow, without the enlargement of practice in 
thinking required elsewhere. Such education has 
become at length, like skill, a requisite of each genera- 
tion in order that our civilization may be maintained. 
For this the states build and the nation sustains agri- 
cultural colleges. 

/Character. — Just as important, though often over- 
looked in enumerating economic forces, is the acquired 
personal habit of self-control. Without it both skill 
and education avail but* little, and it may do its work 
independently of both /\" Tried and trusted" expresses 



48 Rural Wealth and Welfare 

our estimate of the importance of long practice of 
virtue in meeting obstacles. The formation of habits — 
personal, business and moral, — is a matter of time and 
discipline. It costs exertion through a series of years; 
but the power accumulated may be needed only once, in 
some great emergency. 

' The character of the workman, the tradesman and 
the farmer enters more or less into the product of his 
toil and gives it value. \ Though I may not care from 
whence come the shoes I wear, or the butter I eat, I 
do care for the genuineness of both, for which I must 
depend upon the genuine character of the makers and 
sellers of both. This, too, is maintained from genera- 
tion to generation by its successful use in acquiring 
both power and wealth. It cannot be had without the 
expenditure of time, energy and means of the fathers 
and mothers of one age upon their successors. 

/Importance of attainments. — All these personal 
attainments, whether confined to individuals or ex- 
tended over whole communities, must be reckoned 
among producing powers and reckoned with in estimate 
of earnings. A community deficient in either is low in 
ability to supply its own wants or the world's wants, 
and no amount of material capital can take their place. 
They are superior to capital in being less destructible 
by fire or flood, and more easily turned to account in 
new enterprises as needed. No capital is perpetual, 
even in most fixed forms, nor is any personal attain- 
ment sure to remain of direct use; but the latter has a 
larger expectation of usefulness and greater perma- 
nence in the economy of nations.^ 



CHAPTER VI 

COMBINATION OF FORCES FOB INDIVIDUAL 
EFFICIENCY 

Ideal manliness. — Every community has highest effi- 
ciency and best civilization when each individual mem- 
ber has the largest range of abilities to meet, wants, and 
the largest range of wants to be met. An ideal civili- 
zation involves the distinct aim of gaining for each 
mature person in any association the fullest develop- 
ment of all abilities and all materials and tools for 
their use. This is amply illustrated in a family of well 
£rown, well trained, well educated, trustworthy men and 
women with sufficient capital under control to maintain 
the highest activity of every personal power and attain- 
ment. Childhood and old age must always be provided 
for by exertions of those whose abilities are in their 
prime, and accidental weakness of every kind is met 
Prom the same strength. 

Any mature person is best equipped for productive 
industry when, sound in both body and mind, he has 
the accumulated energy of the past for his use in the 
shape of capital and hereditary traits, together with 
skill, education and established character. Such a man 
s recognized at once to have his place among "the 
jieirs of all the ages in the foremost files of time." Any 

D (49) 






50 Rural Wealth and Welfare 

people claiming leadership among nations mnst dependi 
upon its representatives of snch a fully equipped body* 
of men for that leadership. 

From savage to enlightened. — The increasing impor- 
tance of such full manliness, as society becomes more- 
complex in both wants and efforts, is easily seen. In 
ruder life muscular energy and endurance, with some 
slight ingenuity, are sufficient to meet the ruder needs, 
with some chance of saving for future wants of a grow- 
ing family, which will continue the same round of; 
muscular contest with savage conditions. 

The American Indians have given the fairest exhi- 
bition of the kind of welfare which such exertion and: 
accumulation afford. The weak disappear quickly, be- 
cause the strong have too little surplus of energy to care j 
for them. Among those left, both burdens and means- 
of satisfaction are quite equally distributed, because oil 
essentially equal powers of exertion. But in older and 
more civilized communities large portions of the people 
are dependent upon the rest for knowledge, ingenuity 
and skill to keep the very much larger supply of I 
material needed for maintaining the civilization. Ati 
this stage of progress a man with only muscular develop- 
ment finds himself entirely dependent upon some one; 
else for the plans by which all must live. A savage can- 
not share equally with the wise man either in the burden i 
of caring for the community or in the welfare which the 
community enjoys. 

It is easy to see that the relative importance of accu- ■ 
mulated wealth in the shape of capital or of skill or of. 
the character which results from generations of training, 



Ideal of Efficiency 51 

Decomes more and more distinct as the community be- 
comes more developed. Any man, then, who is lacking 
capital, skill and morals, or all three, is in some respects 
ike the savage, and will find his equals among the 
savages. For this reason a pioneer country affords 
opportunity for a youth without skill or personal attain- 
ments of any kind u to grow up with the country;" and 
;he famous advice, "Go west, young man, go west," 
applies strictly to such a youth, and with less and less 
lirectness in proportion as the young man has control 
5f himself and of accumulated wealth. 

A simple diagram (Chart III) may illustrate the 
progress of civilization from the general poverty and 
neffieiency of rude pioneer life to the power of a 
horoughly organized and developed community., The 
joor man, in the sense of one whose abilities are 
mdeveloped and who has no visible means of support, 
s relatively less able to care for himself in the enlight- 
ened community than in the ruder pioneer life. In this 
sense, and this alone, the poor man grows poorer with 
idvancing civilization. This may easily be seen by 
;omparing a thrifty farming community of today and 
ill the accumulated stock, machinery and tools of the 
'arms, with the same community sixty years earlier, 
vhen all was practically wilderness. A strong man 
vith an ax and a hoe could enter the wilderness any- 
vhere and live nearly as well as any of his neighbors. 
>uch a man in the higher country life of our times must 
vork for some one else at wages, or must be supported 
^t public expense. In either case he feels his poverty. 
U; the same time, the extreme of suffering is less likely 



PIONEER LIFE 




SAVING 



ADVANCED CIVILIZATION 



III. Illustrating the relative importance of labor and saving, in the 
progress of civilization from its beginnings in pioneer life. 



Advancing Civilization 53 

to be reached in the richer community. The poorest 
man has comforts of which the pioneers never dreamed. 
Even a tramp can live on the fat of the land, but not by 
his own exertions. The failure of a crop in the pioneer 
country means starvation for a large portion of the few 
inhabitants. A failure in the older community means 
suffering for a few in diminished food and clothing, but 
all live on the accumulations of the past. 

Developing civilization, — This essential advantage of 
accumulating power in individuals, as civilization 
advances, is necessarily connected with the very nature 
of civilization and growth. /As no conceivable device 
can make a babe as efficient as a man, so no contriv- 
ance, political or social, can make an undeveloped man 
equal to a fully developed one.\ 

The intense community of interests in high civiliza- 
tion makes even more important the individual abilities 
of each sharer in those interests. For this reason every 
device for universal education, development of skill and 
strengthening of character, and every check upon 
deterioration of personal strength or wisdom or virtue 
is to be considered. Any neglect of the individual in 
his development of personal attainments retards the 
development of the community. /Any device for the 
equal distribution of wealth which does not increase 
individual thrift in the use of wealth at least retards 
the growth of the community, and may very quickly 
reduce the power of the community as a whole until it 
reaches the inefficiency of savage life A 

All true charity, even equity, requires that the object 
of distribution of wealth shall be the greater efficiency 



54 Rural Wealth and Welfare 

. . . / 

of each individual. If there shall ever be a commu- 
nity of individuals gaining equal enjoyment, it will be 
made up of those possessing essential equality in 
personal powers and attainments, and in accumulated 
capital as well.\ 



CHAPTER VII 

METHODS OF ASSOCIATION 

Simple association. — While the absolute equality of 
individuals referred to in the preceding chapter is prac- 
tically impossible, the community of interests as civili- 
zation advances becomes much closer through various 
plans of association of individuals in common work. 
Indeed, the community is a community because a multi- 
tude of individuals work together. The simplest form 
of association is seen where men work in gangs, all 
acting alike, as in lifting a log or a rock, hoeing the 
field, or in building an embankment by shoveling. 
Among farmers the habit of exchanging work, so com- 
mon in pioneer settlements, illustrates the advantage of 
combination. This may be called simple association, by 
which many hands make light work. 

Complex association. — A more complex association 
ls found in even the rudest settlement when one man 
undertakes a particular kind of labor for all his neigh- 
oors, they in turn doing a different kind of work for 
aim. A farmer in a new settlement found the children 
)f himself and neighbors without a school, and agreed 
:or several winters to teach a school as many days as 
is neighbors would chop in his clearing. This associa- 
ion cleared the land and supplied the school. Such 

(55) 



56 Rural Wealth and Welfare 

exchanges of labor develop rapidly in every growing 
community and form the basis of a most extensive com- 
merce. When "Adam delved and Eve span" the family 
was far better provided for than if both had undertaken 
to delve and spin. The fair exchange of products 
makes each man's product more useful to both himself 
and his neighborhood. Such association is less notice- 
able in a community of farmers, where all are seeking 
essentially the same products, than in almost any other 
community. Yet the presence of the blacksmith, the 
shoemaker, the wagonmaker and the tailor contribute 
very largely to the comfort of all concerned. 

One chief disadvantage of farms remote from vil- 
lages is the want of ready exchange, or association by 
different employments. The part which such exchange 
plays in the accumulation and distribution of the wealth 
of the world is so great that several chapters will be 
needed to present its importance. The study of ex- 
changes is sometimes thought to cover the whole ques- 
tion of wealth. It is often treated as separate from 
production. But its advantages and disadvantages are 
most easily seen by considering all its bearings upon the 
increased product of a multitude of workers. 

Compound association. — A still closer association, 
sometimes called compound association, is found where 
several workers combine efforts of different kinds in a 
single finished product. It is easily illustrated in an 
ordinary dairy, where one of the family drives up the 
cows, another does the milking, another sets the milk 
and cares for the purity of all utensils, another perhaps 
skims the milk and churns the butter, and still another 



Methods of Association 57 

works and packs it. All this labor of many hands has 
its importance represented in the butter packed for use. 
The particular advantages of this division of labor will 
be treated in a future chapter. 

Aggregation of forces. — A still further advance in 
association appears when many laborers in many ways, 
with multitudes of tools and machinery, are combined in 
a huge establishment in such a way as to employ all 
efficiently. This is illustrated in the so-called bonanza 
farms of the west, but more distinctly appears in the 
great manufactories, or in any extensive cooperation or 
great enterprise. A study of these will also require a 
future chapter. 

While all these methods of association blend with 
and into each other in every kind of community, a 
careful analysis of each is necessary to a full under- 
standing of their relation to welfare. For this reason 
it is best to analyze and illustrate each by itself. The 
succeeding chapters will take up all the intricacies of 
exchange before presenting the special advantages and 
disadvantages of technical division of labor and of great 
corporations. 



CHAPTER VIII 

EXCHANGE: ADVANTAGES, LIMITATIONS AND 
TENDENCIES 

Exchange in production. — The immense importance 
of exchange in promoting the welfare of communities is 
easily granted, and is illustrated in every village store 
or even in every simple farming community. Today the 
market for farm products is easily felt to be the most 
important consideration, and weighs in every farmer's 
mind when buying or selling his farm. When a state 
like Kansas raises from six to ten times as much wheat 
as its people can use, exchange is evidently an essential 
factor in every farmer's welfare. 

The multitude of everyday wants in most households 
supplied only through commerce shows the extent and 
importance of this exchange of labor throughout the 
world. The great advantages, however, may be seen 
by a little more careful analysis of the growth of indi- 
vidual powers under a ready system of exchange. Every 
laborer becomes effective by experience in some particu- 
lar industry. A thousand years will not perfect a single 
worker in any of the thousands of employments needed 
to supply his wants. Every farmer knows the weakness 
of a beginner in farming, coming from any other busi- 
ness; and without exchange, every workman must always 

(58) 



Importance of Exchange 59 

be a beginner in everything. Exchange is one of the 
chief motives to accumulation, since others' wants as 
well as our own are kept in view. The "hand to 
mouth " liver is almost always a man of all work, think- 
ing little of exchange. It is especially a stimulant to 
! saving, since it makes capital itself more useful and 
brings it directly into competition with all other forces. 
Products stored in the granary have their significance 
because of exchange. 

Still more important is the cultivation of special 

1 abilities, impossible without exchange. The indefi- 
nitely varied powers of human nature are made most 
useful where each can devote his talent to a definite 
business ; and usually the talent best fitted to a busi- 
ness is attracted toward it. Habits, too, which are 
the chief labor-saving characteristics in human nature, 
become all -important, and enable an individual to do a 
large part of his work with the least possible care. 
The routine of everyday life is followed with little effort 
or pain. The more regular the routine the easier it is 
to follow. 

A still greater advantage to communities is found 
in the enlargement of the range of wants in all indi- 
viduals. The superiority of enlightened men over sav- 
ages is largely due to their greatly increased needs, since 
necessity, the mother of invention, compels exertion and 
finds the way to satisfaction. It seems, however, that 
exchange contributes most extensively to welfare by 
combining individuals into a community, and smaller 
communities into a larger, until the whole world is 
brought into sympathy. Thus every human being 



60 Rural Wealth and Welfare 

gains the advantage of growth in mind and character 
through some contact with every other human being 
within the commercial world. If ever a reign of 
peace and plenty shall extend over the world, no one 
doubts the importance of commerce and intimate ex- 
change in bringing that time. The full advantage of 
free exchange in promoting human welfare cannot be 
over-estimated. 

Exchange limited by powers. — With all its advantages, 
there are certain obstacles in the way of its extension, 
always more or less effective in limiting its range. A 
community can have few exchanges among individuals 
if all are busied in the same or similar trades. A farm- 
ing community has little need of buying and selling 
among the farmers. A horse trade or an exchange of 
one brute for another may supply all necessities. In 
larger communities similar limitations are found where 
abilities are similar, or where habits in education, gov- 
ernment or religion are very uniform. In such cases 
opportunities for exchange are limited, and commerce 
itself grows slowly. 

The story of pioneer settlements is uniformly one of 
slow and uncertain commerce for want of the variety in 
wants and abilities which makes the very foundation of 
exchange. Sometimes "day's work for day's work" is 
the limit of exchange throughout a whole region or 
country. In the world at large limitations often arise 
from hostile feelings between nations, and as yet the 
highest freedom of exchange between people under dif- 
ferent governments has seldom been reached. The 
United States affords the brightest example of people 



Limitation of Exchange 61 

with varied characteristics developed through the stimu- 
lating effect of ready exchange. 

Commerce over-estimated. — So rapid has been the ad- 
vancement of systems of exchange within the last half 
century that men are prone to over-estimate the impor- 
tance of commerce and its interests. The amount of 
wealth in motion exaggerates the importance of wealth 
itself, so that multitudes overlook the foundation in pro- 
ductive industry, and become mere bettors upon the 
market, attempting to catch a part of the moving wealth 
as it passes. Any speculation in mere commercial trans- 
actions may become a very serious obstacle to legiti- 
mate industry by its effect upon both the industry itself 
and the incentives to industry among the people. This 
danger is increased by the greatly extended interest in 
exchange among the rural population. 

Scarcely a farmer in our country is beyond the effect 
of any extensive commerce throughout the world. The 
crops of South America and of the Russian plains are 
now as important to a farmer of Dakota as his own, 
since all must find a common market in the manufactur- 
ing countries of Europe. Speculation on the Chicago 
Board of Trade is likely to be as interesting to a farmer 
in Nebraska as to members of the Board. He is even 
tempted to try his hand at speculation, either directly 
through a commission house or indirectly through the 
marketing of his grain. In either case he is caught by 
the dangerous motion of modern commerce. The chief 
remedy for these tendencies must be found in a wider 
acquaintance with the facts of commercial life and a 
clearer perception of what is genuine commerce. 



62 Rural Wealth and Welfare 

Every farmer needs to distinguish, and distinguish 
carefully, the actual, necessary machinery of trade and 
the principles underlying it, that he may appreciate the 
genuine and oppose the false. On this account several 
chapters are given to questions of exchange, with an 
effort to bring into more prominent light the ways in 
which all commerce affects the farmer's life. 



CHAPTER IX 

VALUE TEE BASIS OF EXCHANGE 

The nature of value. — Perhaps no question in the dis- 
cussion of wealth is of greater importance than the 
nature of value. Certainly the measurement of value in 
all our property is the basis of all exchanges, of all book 
accounts, and of all inventories. 'The worth of any 
piece of property in such estimates always involves some 
comparison, either of things possessed or of exertion 
required or of satisfaction yielded. In comparing an 
apple and a peach, both equally attainable, we may 
value the peach most highly because it gratifies desires 
in higher degree. Thinking of future uses, we may 
value the apple more highly because it will keep longer, 
and so be available for future wants. In considering 
all the kinds of satisfaction to be provided for, we may 
think of the peach as desired by more people who are 
likely to render us service, and therefore more readily 
exchangeable, and so of higher value. Again, the peach 
may be at the top of the tree and the apple within reach, 
in which case we may think whether the peach will give 
enough greater satisfaction to make it worth the greater 
exertion to get it. In this way a single individual, who 
has wants to be gratified only by exertion, forms an idea 
of value as founded upon some relation between his 

(63) 



64 Rural Wealth and Welfare 

wants and his powers, between the desires to be grati- 
fied and the qualities of the object expected to give 
satisfaction . 

Since wealth always implies an accumulated store of 
good things, every one comes to think of the worth 
of his accumulation as estimated by what it will do at 
any time, in any place, in satisfying any need. So, 
most naturally, we associate our ideas of value with 
trade. An exchange of horses brings in not only the 
present qualities of each horse for present service, but all 
the qualities and circumstances affecting the possibilities 
of disposing of the horse whenever something else is 
needed more. An. expert judge of horses not only 
knows when the horse is sound in wind and limb, and 
what are the signs of docility, speed, etc., but also what 
the rest of the world considers the qualities of a satis- 
factory horse. In all experience peculiar circumstances, 
varying the relation between wants and satisfaction, 
affect immensely our estimate of value. When an 
ancient king shouted, "My kingdom for a horse!" he 
was doubtless moved by the uselessness of a kingdom to 
one about to lose his life in battle for want of a horse 
and also by the difficulty at that particular moment of 
gaining a horse. 

In ordinary experience everybody estimates value by 
some comparison with what he can obtain in exchange. 
A picture of a friend may be priceless in two senses: 
first, of so great importance to its owner that nothing 
can buy it; second, of so little importance to anybody 
else that nobody will give anything for it. In any 
inventory of wealth the picture could not be counted; 



Value Analyzed 65 

it is valueless. But in any judgment of personal wel- 
fare it may be beyond price. So, in the universal 
sxperience, the term, value has come to be used as 

ssentially connected with exchanges and with property 
as stored to meet all kinds of wants. 

Value in services. — In a similar way experience has 
ieveloped the idea of value with reference to services. 
A. service may be invaluable, as when a physician saves 

he life of his patient, but the value of that service is 
estimated by the return expected in the community 
vvhere the physician and his patient live. Many services 
)f highest usefulness and most important in welfare can- 
lot be valued in terms of wealth, because no wealth can 

ecure them. Love and patriotism and philanthropy 
cannot be had for wealth. But in comparison of two 
services rendered for hire, both are measured by their 
general utility, either directly or indirectly, and even 
".his estimate is modified by the readiness with which 
iither service can be secured. One who seeks the service 
)f an artist who stands alone among ten thousand 
3eople, may be willing to give the services of a thousand 
)ther men, which can be had for a trifle, because they 
ire everywhere abounding. 

Essentials of value. — Experience seems, therefore, 

o settle upon three conditions for value in any article 
)f wealth or any service rendered. First, the article or 

ervice must have utility — that is, it must be useful in 

atisfying somebody's wants, either present or future. 
Second, those wants must be of such a nature that 
effort on the part of some human being will be neces- 
sary to gratify them. Nothing which can be had at all 

E 



66 Rural Wealth and Welfare 

times by mere desire of it can have value. Third, the 1 
object must be of such a nature as to command otherr 
services or exchange of other wealth. For this reason itt 
must be transferable from one owner to another. 

Utility as related to value. — While utility is as 
basis of all values, it is not the chief element in meas 
uring the value of wealth. The things of highest! 
utility, like air and water, have no value as long as- 
trifling exertion will bring them. Even land is without^, 
appreciable value so long as any person can obtain it by 
settling upon it. 

In general, we measure utility by the relation 
between the nature of any object and human nature as 
expressed in wants. A bushel of wheat has utility 
equal to the number of loaves of bread it will furnish to 
hungry humanity. In this respect every bushel may. 
have the same utility as every other. This would be* 
true if every bushel of wheat was wanted by hungry 
people able to exert themselves in securing it; but ift 
five bushels of wheat are sufficient for each human 
being in a year's supply of bread, a distribution to alii 
the world of more than five bushels to each would make 
some of the wheat useless. So if the world's product! 
of wheat more than supplies the world's want, the extra r 
amount will be without utility unless some means of 
storing against future want is devised. In that case the 
utility of the stored portion will be lessened by the 3 
extra exertion required to store it until the need comes.. 
One may be glad to pay twenty -five cents for a good I 
dinner, but an equally good dinner offered immediately 
afterwards will have no utility, unless he can save it for 



Utility and Value 67 

supper. If the dinners offered are so many as to imply 
that several will be useless, the value of each is likely to 
be affected by this estimate of lost utility in some. 
Dinners in that case are liable to be furnished for what 
they are worth for cold suppers. 

If any article of commerce, like wheat, has its 
highest utility in one way of meeting wants, as in 
bread, that utility will have a strong influence upon 
value as long as the supply of wheat is not too great for 
this want. If the supply of wheat should be so great 
that only a small portion could be used for bread, other 
utilities would be sought. It would be used for feeding 
hens, and perhaps for cattle feed. If still the amount is 
too great to be consumed, it might be used for starch. 
In this case the least useful portion is likely to furnish 
the estimate of value for the whole. Both the raiser of 
wheat and the user will consider the lowest use as the 
probable basis for sale. 

Before the opening of the Erie canal a farmer in 
northern Ohio drew a load of wheat twelve miles in 
hope of a market. The dealer said: "It isn't worth 
anything, since nobody has any use for it. If you had 
a load of sand, I could pay you for that, to fill the mud- 
hole in front of my store." Since the utility of some 
wheat was nothing, the value of all wheat tended to 
nothing. On the other hand, if wheat is scarce in the 
communitjr, it will be used only to meet the wants of 
the delicate or the fastidious, whose comfort and life 
may depend upon it. In that case its general value 
will be estimated b} r its higher utility, whatever other 
use it is put to. That is called a final utility, which, in 



68 Rural Wealth and Welfare 

any particular case, is the lowest use implied in con- 
suming the supply. And this final utility is the only 
one influencing the estimate of value. 

It is possible, therefore, that the total utility of 
anything, like a paper of tacks, for instance, may be 
greatly increased, since it has indefinitely more uses 
than when tacks were first made. Yet the supply of 
tacks is so enormous that to consume them we must use 
them for trifling purposes ; and therefore their value is 
a trifle. When we have water to throw away, its value 
is nothing. When water is limited to culinary uses, its 
value is considerable. When water is sufficient only to 
slake extreme thirst, its value is beyond price. Even 
the prospect of a future supply diminishes the utility of 
any commodity, since time is an important element in 
satisfaction. Thus a store of potatoes in early spring, 
however well preserved, has its final utility lowered, 
and therefore its value lessened, by the prospect of new 
potatoes. 

On the other hand, the present value of a field of 
grain or the young orchard is dependent upon its utility 
in meeting a future want. Everything which enhances 
prospective utility of any article enhances its value ; and 
everything which diminishes the chance of such utility, 
like bad weather, insects or plant diseases, diminishes 
the present value. In this way risk diminishes the 
value of wealth subject to it and increases the value of 
wealth which has passed by it. 

In general, the usefulness of anything is no criterion 
for measuring value, because other elements of value 
are more important. Henry C. Carey says, "Utility is 



Cost and Value 69 

the measure of man's power over nature; value is the 
measure of nature's power over man." This may be a 
striking way of saying" that great utility implies a dis- 
covery of uses, while great value often indicates only 
difficulty in securing what has great usefulness. 

Exertion as related to value. — Since utility, however 
essential to value, is not its measure, we are led to con- 
sider whether the exertion required to obtain any article 
desired may not measure its worth. This is certainly a 
matter of prime consideration, and many have been led 
to suppose the cost of production, by which is meant all 
the exertion necessary to bring any commodity to its 
final consumer, to be the sole and absolute measure of 
value. 

This supposition, if ever correct, is subject to great 
modifications. None know better than farmers that a 
bushel of wheat from one field may have cost twice as 
much as a bushel from another field, without any 
possible distinction in value. Every mechanic knows 
that what he has accomplished with great exertion may 
have been duplicated by some labor-saving device with 
half the exertion, the two values being essentially equal. 
Nothing is more common than to find articles in the 
market sold without regard to cost because they are 
superseded by more desirable articles. Indeed, the most 
ardent defender of cost as the sole basis of value is 
obliged to notice multitudes of exceptions to the rule. 
Yet it must be granted that only those articles involving 
effort in securing them have value at all, and in general 
the amount of effort actually put forth has some relation 
to our estimate of value. 

In general, men do not exert themselves more than 



70 Rural Wealth and Welfare 

necessary to meet wants, and in any exchange with 
others estimate the value of what they have produced by 
the exertion expended. Yet, as products of the same 
kind exchange in the same market without regard to 
their individual cost, it is evident that some other prin- 
ciple must be discovered. Nevertheless, no farmer will 
continue indefinitely the raising of a crop which brings 
in the market less than a fain average return for his 
labor in raising it. In a series of years he expects his 
wheat to return a fair compensation for labor expended. 
In the same way every manufacturer expects a full 
return for all cost of all his efforts, and would not con- 
tinue his work from year to year without such expecta- 
tion. Moreover, when for any reason the market value 
of anything is much above its cost, somebody is ready 
to increase the supply of that particular article, and 
more will add their efforts in the same direction until its 
value approaches nearly the general cost of production 
as compared with the cost of other products selling in 
the same market. 

Normal value. — In this way the cost of production is 
said to fix the normal value of any article of commerce 
capable of production in indefinite quantity and within 
limited time. For this reason farmers are interested in 
finding the average cost of production of wheat, corn, 
etc., within a region supplying their market. They are 
even interested in knowing the conditions for wheat 
raising in India, South Africa and Australia, since the 
cost of production there may influence the value of 
wheat throughout the world. The normal value of prod- 
ucts capable of indefinite multiplication tends always 



Cost a/nd Value 71 

toward the value of the least costly. This is sjiown in 
the effect of labor-saving machinery upon the value of 
cloths and other goods . It is equally true in agriculture 
that wheat raising upon cheap land with extensive use 
of machinery and economical methods of culture and 
harvesting brings down the normal value. So long as 
more land can be applied- to wheat raising with these 
advantages, the less productive methods may be too 
costly for the market. 

On the other hand, if any production cannot be 
largely extended so that the supply in market barely 
meets the requirements of purchasers, the tendency of 
normal values is toward the cost of the most costly part 
of the product required to meet wants. This is because 
the supply is kept up only by the exertion of the greater 
amount of labor as well as the less. If farmers in 
western prairie country can raise corn at an expense of 
15 cents per bushel, as they can upon an average, so 
long as that region can raise all the corn required no 
less productive region can force the normal price above 
what will keep western farmers raising corn. When the 
western crop fails, the price is far above normal value, 
and may even go above the cost of the most costly corn 
in market, under a principle called the law of supply 
and demand. 

Since improvements in method so constantly lessen 
the normal value of products, Mr. Carey made the effort 
to measure value by "cost of reproduction," meaning, I 
suppose, that any article produced at any time and place 
is likely to bring in any market a price equal to the cost 
of similar articles produced under the most improved 



72 Rural Wealth and Welfare 

methods anywhere used in the present. This, of course, 
does not apply to articles not desired in the present, 
because deteriorated or out of fashion or less useful 
than some new device for a similar use, but only to 
those articles of full utility in having all the qualities 
needed to meet the desire of purchasers. Even a 
diamond like the famous "Kohinoor" would have its 
almost priceless value reduced to the cost of securing 
similar jewels equally desirable if a process of crystal- 
lizing carbon were suddenly discovered. It is easy to 
see, then, that cost measures value only so far as it is 
directly connected with the available supply in any 
market. Under ordinary circumstances the supply can- 
not be increased unless the cost is met, but the rule is 
modified by any peculiarity of season, or conditions of 
trade, or production by cheaper methods or cheaper 
labor, or by the changing wants of a community. The 
application of all these influences may be studied under 
the so-called law of supply and demand. 

Supply and demand; markets. — The law of supply 
and demand is only a statement of the general fact that 
market value tends to increase with increase of demand 
and to decrease as the supply to meet the demand in- 
creases. It must be understood that a market means a 
particular spot where buyers and sellers of any article 
of commerce meet at a particular time. The supply is 
the amount offered for sale at a given price. The 
demand is the amount buyers will purchase at the 
same price. 

Thus, if on a certain day sellers offer in Chicago 
10,000 hogs, with a willingness to take $5 per cwt., they 



Supply and Demand 73 

represent the supply. If on the same day in the same 
place buyers are willing to take 10,000 hogs at $5 per 
cwt., $5 will be the market price, and the supply and 
demand will be equal. If, however, only 5,000 hogs 
would be bought at $5 per cwt., 5,000 hogs will be with- 
out buyers, and their owners will seek, by lowering the 
price, to find buyers at $4.50 per cwt., if necessary. 
Since all the sellers will feel the same pressure, the 
tendency of market value will immediately be down- 
ward. Buyers willing to pay $5 per cwt., finding many 
sellers, will expect a reduction in price, and the price 
will certainly go down until the hogs purchased equal 
the entire supply. And that will not be until the buy- 
ers are stimulated by reduction of price, so that as 
many hogs are wanted as there are for sale. If that 
point is reached at a price of $4.50 per cwt., the market 
value is found there. The limit of time within which 
this reduction takes place will depend upon the ability 
and willingness of sellers to wait. If the product 
offered is perishable, or costly in keeping on the market, 
the reduction will be speedy. Otherwise it may be held 
indefinitely with the hope of compelling buyers to come 
to the higher prices, in which case it is practically 
taken out of the market. Only those commodities are 
practically in the market which are held for sale at the 
market price. Only those buyers practically enter 
the market who are able and willing to give the 
market price. 

The higgling of the market. — The process of reaching 
an agreement between buyers and sellers is called the 
higgling of the market, and represents the conflict be- 



74 Rural Wealth and Welfare 

tween the wishes of sellers to get the most possible for 
their products, and the wishes of buyers to get the most 
possible for their money. In fact, both buyers and 
sellers have the same motive: to make their own exer- 
tions go as far as possible in supplying their own wants. 
The fact that money enters into the transaction makes 
no difference with the bargain. Two farmers trading 
horses have exactly the same desire : to get the full worth 
of the horse to be given. A genuine bargain usually 
benefits both parties. Even in a horse trade each owner 
expects to be benefited hy the exchange; and only a 
jockey seeks that benefit in taking advantage of his 
neighbor's ignorance or inexperience. 

So, in the general market, every seller gains what he 
desires more than what he possesses, and every buyer 
has exactly the same experience. Two friends may 
exchange books if either would be benefited by the ex- 
change. In that case the one gaining the less valuable 
book gains the satisfaction of giving to his friend. 
Both are still profited, one by the larger value received, 
and the other by the pleasure of giving. In such an 
exchange no basis of value is reached, but in any ordi- 
nary bargain the final adjustment will be as nearly as 
possibly upon the test of value in the market. Between 
one buyer and one seller, the bargain is likely to turn to 
the advantage of the one who is quickest to discover the 
weakness of the other. If two persons are discussing 
the price of a house for which the seller wishes $1,000, 
but will sell for even $600, and for which the buyer 
hopes to give only $60Q, but will pay even $1,000. the 
seller will gradually lower his price, and the buyer 



Market Test of Value 75 

gradually raise his offer until one or the other discovers 
he working of his neighbor's mind. These are the 
latural conditions for sharp bargaining 

In the larger market the interests of a multitude of 
myers and a multitude of sellers have weight, and do 
ihrewdness can prevent a settlement upon such a price 
is comes nearest to satisfying all parties. The so-called 
aw of supply and demand is a brief statement of the 
act that sales cannot be made in open market above the 
nark where buyers and sellers agree, and that mark is 
essentially the price at which all who are willing to buy 
it the price current are met by those who are willing to 
lell at the same current price. With reference, then, to 
dl articles sold in open market, it is safe to say that the 
>nly test of value is the price which the public is wili- 
ng to pay. So universal is the acceptance of this prin- 
ciple in practical affairs that everybody estimates the 
^alue of his property by the price at which it will sell. 
^ny appraiser or assessor who should adopt a different 
)rinciple would be considered wholly untrustworthy. 

Freedom in markets. — In this higgling of the market 
t is absolutely necessary that buyers and sellers have 
essential freedom of choice and fairly equal information, 
rhere may be conditions of law preventing free compe- 
tition, as under the regulation of prices attempted in 
various countries prior to the present century. In Eng- 
and, during nearly four centuries, limits of prices for 
learly every article of food and clothing were named by 
aw. Yet in every instance the conditions of the market 
vere stronger than the laws, and the restriction upon 
:ree competition and free discussion of prices actually 



76 Rural Wealth and Welfare 

destroyed the open market. The conditions of a bank- 
rupt sale at auction reduce the competition to a struggle 
between buyers. In this case a very slight collusion be-: 
tween the buyers may destroy the market. This is^ 
frequently illustrated in the sale of real estate after! 
foreclosure of mortgages. The unnatural conditions of I 
auction at auy price are so evident as to make common 
the secret emploj'-ment of sham bidders, shrewd enough 
to push actual buyers as far as they will go without pre- 
venting the sale. Somewhat similar conditions may\ 
exist in a great cattle market, in which immense quanti- 
ties of cattle are delivered by owners, while the number i 
of buyers is few. The great packing houses have the 
advantage of being almost the sole bidders for what 
must be sold at their price. These conditions, however, 
are not made by the packing houses, but by the large 
supply subject to immediate sale. Such conditions are 
much more noticeable in the market for ripe berries, 
when a slight excess of supply makes these perishable 
products of trifling value. 

Conditions on the other extreme, from scarcity of 
supply and anxiety of buyers, may also interfere with a 
free market. Any scarcity in food products leads to an 
anxiety on the part of consumers to buy and an equal 
disposition on the part of owners to hold for highen 
prices. In this case, while the law of supply and 
demand is still active, the effects are quite out of thet 
ordinary course. Thus, for a long time it has been esti- 
mated that a scarcity of one -tenth in the natural supply, 
of wheat raises the price three -tenths, scarcity of two- 
tenths raises the price eight -tenths, scarcity of three- 



Market Test of Value 11 

enths raises the price one and six -tenths, scarcity of 
lour -tenths raises the price two and eight -tenths, and 
scarcity of one -half makes the price of the half -crop 
pur and a half times greater. A decrease in the suppty 
>f less essential foods evidently cannot have equal effect. 
Chus, a scarcity of sugar, causing increased price, will 
lirectly reduce consumption of sugar, so that the limit 
nay he easily reached. The same conditions may exist 
vith reference to meats, since a high price diminishes 
he demand from the disposition of people to eat less 
neat. Indeed it has passed into almost a proverb that 
lear bread makes cheap meat, for the reason that few 
nil diminish the supply of daily bread, but the mass 
,re willing to lessen the meat diet to save expense. 

Similar conditions, affecting every market for any 
ommodity, may easily be discovered. Yet in spite of 
11 these extreme fluctuations, no better test of value 
ias been suggested than the market price in open, unre- 
trained competition of buyers and sellers. 

The market price. — In the discussion of value so 
ar, the term market price has been used because per- 
ectly familiar to everyone. It is necessary, however, 
o call attention to the fact that price always indicates 
n estimate of value in units of current money. If that 
loney itself has a fluctuating value, the same article 
lay have at different times different prices with the 
ame value, or the same price with different values. 
1ms market prices in our country during and after the 
ivil war, in which a paper currency gave the unit of 
rices, cannot safely be compared with each other, and 
an far less be compared with prices upon a specie basis. 



78 Rural Wealth and Welfare 

Even the reduction to a so-called gold basis may give 
misleading ideas in regard to the market, since a new- 
element of speculation in gold enters into the calcu- 
lation. In all the accompanying illustrations of flue 
tuating prices, this particular abnormal condition has 
been carefully excluded. Any fluctuations in the value 
of money metals, necessarily affecting the relation of 
market price to market value, will be treated under 
standards of price in Chapter X. 

Prices of farm products ; the crop year. — The actual 
fluctuations of market prices under the law of supply 
and demand can be most clearly seen by a careful study 
in the same definite market during a psriod of years. 
For illustration here the staple products of the farm 
have been chosen, and the markets of Chicago and New 
York, as most truly representative, have furnished the 
facts for study. These facts are presented to the eye 
directly by a series of charts, each of which has been 
most carefully prepared from official records, and gives 
within narrow limits a large range of investigation. In 
every case involving annual crops, it seemed necessary 
to rearrange statistics so as to cover the actual year 
affected by the crop in question. September 1 w T as 
chosen as the beginning of each year, because that date 
is nearest the time when the new crop of the season 
appears in market and directly affects the price of such 
products in store. All calculations upon live stock have 
been brought to the same basis, for the reason that the 
supply of marketable stock is largely dependent upon 
the supply of feed for stock. It seems very desirable 
that all statistics in regard to markets and productive 



Fluctuation of Prices 79 

industry should be brought to a uniform year. The 
year given in these charts seemed best to suit the sub- 
jects treated. It is possible, however, that for all data 
convenience would settle upon July 1, the beginning of 
the fiscal year in the United States, as the best for 
beginning the universal statistical year. Each chart in 
the series, of course, requires its particular explanation. 

The fluctuations of supply and prices for series of 
years are exhibited in the Charts 4, 5, 6, 8, 9 and 12, 
and these are explained in detail at the close of the 
chapter. 

Fluctuations with season. — Every product of the 
farm is known to have conditions favorable or unfa- 
vorable from 'the mere changes of season affecting 
the prospective supply. Conditions equally dependent 
upon the seasons have something to do with demand. 
The result of both combined is worthy of study by 
farmers and dealers in farm produce, that all may get the 
full benefit of such knowledge, as the study affords . For 
this purpose, charts showing the annual fluctuations of 
staple products in the leading markets have been care- 
fully prepared. These may have a greater usefulness 
than simply to illustrate the law of supply and demand, 
since it is within the possibility of actual practice to in 
some degree modify by provident foresight the extremes 
of fluctuation. It is hoped that the suggestiveness of 
these charts may help the most enterprising farmers to 
adjust their practice to conditions of market. 

Charts Nos. 7, 10, 11 and 13 illustrate the fluctua- 
tions as related to seasons. 

Law of diminishing returns. — In considering the value 



80 Rural Wealth and Welfare 

of farm products, it is necessary to notice a natural 
tendency in all products of the earth toward greater cost 
of effort in production. This is called the law of dimin- 
ishing returns, and is illustrated in every industry where 
the accumulations of nature are depended upon for 
making labor effective. Hunting, fishing and mining 
afford familiar illustrations of more work of the same 
kind for equal product. 

Agriculture, however, gives the most extensive 
available illustration of the facts grouped under this 
law. In the first place, the farmer is subject to it by 
mere location. The product of a field near his house 
and barn costs less exertion than the product of a more 
distant field. In the second place, he is likely to have 
chosen for his first efforts in crop raising the land most 
readily yielding its fertility in crops. If he extends his 
operations to less productive soil, he must work more 
for the same product. In the third place, if a certain 
amount of work upon a certain field will give him 
twenty bushels of wheat, he must give a good deal more 
than twice as much work in the way of tillage and 
manufactured fertilizer to make a crop of forty bushels. 
The proof of this is clear in the disposition of farmers 
to buy more land instead of to increase labor upon a 
limited sx>ace possessed. 

A specific statement of the law of diminishing 
returns is that in the cultivation of land an increased 
amount of effort under usual conditions fails to give a 
correspondingly increased amount of produce. 

Exceptions to law of diminishing returns. — Exceptions 
to this law are easy to find, as where the first selection 



Diminishing Returns 81 

of land in a new country has had reference rather to 
safety from wild beasts and savages or malarial diseases 
than actual store of fertility. Another exception is 
found in any new country, where imperfect adjustment 
of labor to conditions of soil and climate are liable at 
the outset to prevent the full use of natural powers of 
the soil. So evident are these two exceptions in imper- 
fectly developed agriculture that some have disputed the 
general fact, yet all must admit the certainty of dimin- 
ished returns from multiplication of the same kind of 
efforts upon the same space, and general proof is 
abundant in all long settled communities. 

Effect of improved farming . — Counteracting this ten- 
dency to diminishing returns, and in many instances 
more than overcoming the difficulty, is a tendency toward 
improved methods in farming by more perfect applica- 
tion of labor to the soil, better developed crops, better 
adaptation of live stock to culture, improved machinery 
of every sort, and more extended range of operations in 
farming, reducing the restraints of space by improved 
transportation and more economical use of natural 
fertilizers; in short, by any improvement through which 
labor is made more directly effective in either quantity 
or quality of agricultural products. The whole story- of 
the development of agriculture in all these ways fur- 
nishes abundant illustration of this counteracting ten- 
dency. In some regions it has more than counter- 
balanced the tendency to diminishing returns. Various 
staple products, like wheat, show in their diminishing 
value the advance in methods of culture and adjustment 
i of labor to production. 

F 



82 Rural Wealth and Welfare 

Diminishing values. — The above is only a particular 
illustration of the general tendency of all values to 
diminish with every improvement in tools, machinery, 
economy of materials and saving of time, as the world 
gains wisdom in applying labor to the meeting of 
material wants. With every discovery of more perfect j 
power or better use of natural forces, like electricity, 
or easier ways of handling raw materials, as in de- 
veloping aluminum from crude clay, the value of the 
product quickly diminishes. 

A familiar illustration is found in the manufacture 
of steel. The so-called Bessemer process, introduced ( 
some thirty years ago, reduced the actual labor of 
making steel from iron by more than one -half. Im- 
proved furnaces and greatly enlarged operations have 
reduced still further the labor involved, until now steel j 
often takes the place of iron, and the value of all such 1 
products is greatly diminished. This is easily illus- 
trated by comparison of prices during a series of years, 
as shown in chart No. 14. That this reduction in price • 
is not the result of poorly paid labor, but of better ' 
returns for labor expended, is evident to any one investi- 
gating the tendency of wages or of living among wage- 
earners, or of the general improvement in welfare of 
communities where these labor-saving methods are | 
applied. Any hardship connected with these diminished S 
values falls chiefly upon the laborers who fail to adjust 
their work to the improved method. But even they 
gain for the diminished value of their product a larger j 
return on the whole through exchanges than the higher 
values had brought them before. 



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84 Rural Wealth and Welfare 



CHART NO. 4 

Numbers of live stock compared with increase of population and 
mileage of railroad, 1860 to 1898, in the United States 

Explanation. — This chart exhibits to the eyes a comparative) 
increase of (1) population, (2) sheep, (3) hogs, (4) railroad mile- 
age, (5) beef cattle, (6) cows, (7) horses, (8) mules. The figures 
followed in making this chart are taken from the best estimates 
available, chiefly from the reports of the United States Department 
of Agriculture. It shows that railroad mileage has increased I 
faster than the population, with some slight exceptions, and its 
fluctuations mark quite distinctly the periods of financial specula- 
tion and distress. The great fluctuations in the line of sheep rais- 
ing may be seen to have some correspondence with special tariff I 
legislation. The striking opposition of hog raising to sheep raising 
is in accord with the universal experience that farmers easily turn 
from one to the other. The rapid development immediately fol- 
lowing the civil war represents the restocking of farms and the 
great expansion in farm industry so noticeable during that period. 
The falling off in numbers of live stock during the last five years 
is evidently a reaction from a very apparent over-production in 
many directions during the previous ten years. The miles of rail- 
road are shown in thousands, the population and live stock in 
millions. 

CHART NO 5 

Acreage and yield of corn, wheat and oats, 1862 to 1897, \ 
in the United States 

Description. — This chart is intended to show the fluctuations ■> 
from year to year in acres devoted to the three staple crops, to- 
gether with fluctuations in the corresponding years in yield oft' 
each. Figures on the right show the number of millions of acres. . 
Figures on the left give millions of bushels. Continuous lines ■> 
show the acreage. Dotted lines show the yield. For convenience 
of comparison, the line of increasing population is added. The 



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86 Rural Wealth and Welfare 

broken lines indicate what might have been the consumption of 
each of these staples within our own country, if the people had 
used throughout all the years as much of each as during the five 
years of plenty from 1888 to 1892. Lines marked 1 tell the story 
for corn ; those marked 2 for wheat ; and those marked 3 for 
oats. In comparing the number of acres as given on the right 
with the number of bushels as given on the left, it will be seen 
that an average yield of corn is assumed to be 25 bushels per acre ; 
an average yield of wheat, 12 bushels ; and an average yield of 
oats, 28 bushels. The variations of the dotted lines above or 
below the continuous line show whether the yield was greater or 
less than these averages. The average assumed is evidently too 
high for the pats. 

Explanation. — Several important facts are shown. First, 
there has evidently been a very great increase in the amount of 
these staple crops in proportion to the population, with a recent 
tendency toward reduction. Second, all three have exceeded the 
needs for domestic consumption, and at the same time ; while it 
is evident that the rate of consumption in the early years could 
not have been equal to that of recent years. This appears very 
striking with reference to corn. An explanation of the increased 
consumption of corn may be found in its larger use for fattening 
pork and beef for export as well as for domestic consumption. It has 
also entered quite largely, through improved manufacture of meals, 
starches and syrups, into table use. The consumption of oats is 
known to have greatly increased in its use for breakfast food. 
The per capita consumption of wheat, while slightly increased in 
some quarters through the cheapening of flour, has been dimin- 
ished by the larger use of corn and oats, and a far greater variety 
of table food. Quite probably, however, the data as to corn rais- 
ing in the first few years of this period are not complete. The 
years of the war made such statistics difficult to obtain. The dif- 
ficulty with reference to wheat raising was by no means as great, 
since the wheat raising regions were more directly accessible. 
Third, the seasons of abundance and those of poor crops can easily 
be seen. It is evident that while the three crops are not always 
poor together, they are too frequently so to balance each other in 



Yield of Crops 87 

meeting the risks of farmers. Fourth, it appears that the fluctu- 
ations in yield are much greater in late years. This is accounted 
for by the greatly increased proportion of lands cultivated upon 
the plains of the western states and subject to greater fluctuations 
of climate. It will be noticed that the acreage frequently falls off 
in the years showing inferior yield. This shows that sowing and 
planting have frequently been affected by unpropitious weather. 

: In fact, wheat fields have frequently been plowed up in the spring 
and not counted in return of acreage. Reductions in the acreage 
of wheat, however, appear frequently succeeding an immense 

, crop. This indicates the effect of low prices. Fifth, the bearing 
of the total product upon the prices of these staples, while sug- 
gested by the greatly increased amount, will be more clearly seen 
by reference to Chart No. 6. 



CHART NO. 6 

Fluctuation of prices of wheat, com and oats in New Fork, 

1878 to 1896. 

Explanation. — This chart exhibits the average price of each 
of these three staples in September, December and May of each 
year. These months are chosen as giving without too great com- 
plication the widest range with reference to a particular season. 
September gives usually the price of the first of the new crop ; 
December shows usually the fullest marketing of crops; May 
marks the month of largest speculation with reference to the 
incoming crop. Corn is less distinctly affected by these peculi- 
arities, being subject to different conditions of the weather as 
well as of marketing. But the correspondence in price to a cer- 
tain extent is easily perceived at a glance. The reason for this 
correspondence is partly in the uniform effect of seasons, as 
shown in Chart No. 5, and partly in the fact that either of the 
crops may supplement, in certain respects, a deficiency in either of 
the others. 

Wheat prices. — With reference to wheat, No. 1 in the chart, 
further particulars as to prices are shown. The horizontal line in 



88 Rural Wealth and Welfare 

each year gives the average price of the year ; the diagonal line 
gives the extremes of prices, highest and lowest, within the twelve 
months from September to September again. The dot within the 
circle gives the estimated average of farm prices on the first of 
December, as given by the Department of Agriculture. The rela- 
tion of this, somewhat constant, to the New York price for 
December, as given in the line directly above it, may be of interest 
as showing the average actual expense of bringing wheat from all 
over the United States to the New York market. Where the 
difference of the two prices is more than an average, a speculative 
turn in the market during December is indicated, the farm price 
being fixed on the first day of December. The same fact of specu- 
lation is also shown in years where the diagonal line is longer 
than usual. 

Special variations. — At the top of the chart is shown the 
world's visible supply of wheat for each year, each horizontal 
line indicating 500,000,000 bushels. The shaded portion gives the 
amount exported by the United States and the part above the 
shaded portion indicates the amount consumed or stored within the 
country. Thus, in the year 1894-5 the total wheat crop of the 
world was 2,672,000,000 bushels, of which the United States fur- 
nished 460,000,000, 144,000,000 of this amount being exported. 
This year marked the lowest price of wheat in the record, together 
with the largest crop in the world, though not in the United States. 
A proportionally small amount exported explains the falling out of 
the bottom of the wheat market. By reference to Chart No. 5, it 
will be seen that while the wheat crop of that year was consid- 
erably above the average, the corn crop and oat crop were far 
below the average. This explains the fact appearing in Chart No. 
6, that the price of wheat was lower than the price of corn at the 
beginning of that year. It is probable that the use of wheat as a 
substitute for corn in feeding stock actually saved the wheat from 
a still lower price. The crop of 1891, the largest on record in the 
United States, was accompanied by a moderate crop in the rest of 
the world following two other moderate crops, indeed two short 
crops, for the entire world. The large amount of wheat exported 
explains the reason why the fall of prices was not greater in this 



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90 Rural Wealth and Welfare 

country. That the price did not fall faster was due to the fact, 
remembered by many, that farmers, as well as speculators, held 
to the crop with the expectation of larger demand from abroad. 
When the crop of 1S92 was felt to be still larger throughout the 
world, the price fell rapidly, in spite of a smaller crop in the 
United States. But wnen the prospect of an inferior crop in this 
country for 1893 was felt in the spring, the price rose a trifle. Yet 
as soon as the harvests of the world showed an enormous crop 
outside the United States, the price dropped again. The crop of 
1889 was a short one in the world, and apparently should have 
affected the price of wheat in this country more than appears ; but 
when the total amount exported is seen to leave more than an 
average crop in store, it is easy to see why the price in this coun- 
try did not rise. The explanation of this small exportation is in 
the fact that the greater part of the shortage in yield was in coun- 
tries like Russia, from which no demand was felt, because the 
people simply went without. The starvation of people in such 
countries affected the demand for wheat in this country only so far 
as our benevolence enlarged the market. The peculiar shape of 
the line of wheat prices in 1889 without any correspondence in 
prices of corn and oats is due to a speculative movement for 
December wheat in Chicago. The attempted corner in wheat failed 
suddenly, or it might have produced a line similar to that of 1897-8, 
due to the famous long-continued Leiter corner. 

Sources of information. — The object of this chart, taken alto- 
gether, is to show the general law of market prices as governed by 
supply and demand from the actual facts in the market for wheat. 
The facts are taken from the best records available. The prices 
are from the daily record of the Produce Exchange of New York. 
The average price for the year and the fluctuations within the year 
are given for the period from September 1, when the new crop 
appears, to the August following, this being the period actually 
corresponding in market with a year represented by the crop 
figures. The estimate of the world's crop since 1885 is taken from 
carefully prepared statistics in the United States Department of 
Agriculture. The estimates prior to that date do not include the 
entire world, because no statistics can be reached, but they do 



Product and Price 



91 



lclude the most careful estimates of all countries whose product 
ntered into the world's market. No effort has been made, for 
sar of complicating the chart, to show a similar correspondence 
etween supply and price in reference to corn and oats. The 
ables following, however, give data for such comparison with 
eference to this country alone. The export of corn and oats has 
een too limited to play any great part in modifying prices. 

Table of production— wheat, com, oats, 1878 to 1897 
(Figures give millions of bushels) 



Crop 
Year 



J78-9... 
£79-80., 
B80-1... 
81-2... 
182-3.. 
83-4.. 
;J84-5.. 
85-6... 
-7.. 
87-8.. 
88-9.. 
89-90 . 
90-1.. 
91-2.. 
92-3 . . 
193-4.. 
94-5.. 
195-6.. 
96-7.. 
97-8.. 



Oats 


Corn 




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P 


P 


1,209 


p 


H 


P 


P 


571 


$0 30 


1,551 


$0 47 


420 


150 


270 


$1 08 


363 


64 


1,547 


50 


1,008 


448 


180 


268 


1 56 


417 


44 


1,717 


59 


1,145 


498 


186 


312 


1 21 


416 


51 


1,194 


71 


1,097 


380 


121 


259 


1 43 


488 


46 


1,617 


73 


1,270 


504 


147 


357 


1 06 


571 


39 


1,551 


66 


1,066 


421 


111 


310 


1 14 


583 


33 


1,795 


55 


1,201 


512 


132 


380 


84 


629 


34 


1,936 


53 


2,093 


357 


94 


263 


95 


624 


35 


1,665 


49 


2,113 


457 


153 


304 


90 


659 


33 


1,456 


63 


2,266 


456 


119 


337 


92 


701 


31 


1,987 


47 


2,221 


415 


88 


327 


1 05 


751 


30 


2,112 


42 


2,075 


490 


109 


381 


86 


523 


48 


1,489 


63 


2,172 


399 


106 


293 


1 04 


738 


41 


2,060 


62 


2,432 


611 


225 


386 


1 07 


661 


37 


1,628 


51 


2,481 


515 


191 


324 


77 


638 


34 


1,619 


45 


2,562 


396 


164 


232 


68 


662 


34 


1,212 


56 


2,672 


460 


144 


316 


61 


824 


23 


2,150 


36 


2,552 


467 


126 


341 


71 


707 


23 


2,281 


30 


2,303 


427 


145 


282 


72 


698 


28 


1,902 


32 


2,227 


530 


225 


305 


99 



Remarks 



Corner. 

Europe's 
crop 
alone 
estima- 
ted. 



Corner. 



Fell to 98 
cents. 



Corner. 



CHART NO. 7 



nnual fluctuations in the price of wheat. Highest year, lowest year, 
and average of twenty years in New York, 1878 to 1897 

Explanation. — This chart is intended to show the tendencies 
£ the market for wheat from month to month throughout the 





SEP. 


OCT. 


NOV. 


DEC. 


JAN. 


FEB. 


MAR. 


APR. 


MAY 


JUNE 


JULY 


AUG. 




RECEIPTS 


5.90 


5.52 


4.82 


2.39 


1.11 


.97 


1.29 


1.59 


3.85 


3.56 


3.69 


5.34 


REC'PTS 


CO 

ID CON 

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1878 
TO 
1897 

1894-5 


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4 
5 
6 

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1.50 

1.40 

15.30 

1.20 

1.10 

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VII. Annual fluctuations in the price of wheat 
1878-1897. Page 91. 



in New York, 



Prices of Wheat in England 93 



market year. In the center is given the averages of highest prices 
and of lowest prices for each month in the New York Produce 
Exchange during the period from September, 1878, to August, 1897, 
jinclusive. The horizontal lines between the averages of extremes 
give the average price for the twenty years in the several months. 
The diagonal lines give for each month the extreme fluctuation 
during the twenty years. Above the lines of averages are given 
'the fluctuations by months in the year 1881-2, the year of highest 
prices. The upper of the two continuous lines gives the top prices 
of the mouth and the lower- the bottom prices. The short hori- 
zontal lines give the average price for each month ; and the double 
horizontal line across the chart represents the average price for 
the year. Below, the fluctuations in wheat prices for 1894-5, 
the year of lowest prices, are shown in the same way. At the top 
of the chart are given, in millions of bushels, the receipts of wheat 
in New York. The shaded double column in the center under 
each month gives the average receipts for twenty years. To the 
left, a single column shows the receipts for 1894-5. To the right, 
a single column gives the receipts for 1881-2. Since the receipts 
at New York are chiefly for export, the general correspondence 
between receipts and prices is rather a result of a larger application 
of supply and demand than an exposition of it. The chief use of 
the chart is to show the fluctuation of prices under varying local 
conditions. The figures on the left give the price per bushel, and 
the figures on both left and right at the top indicate millions of 
bushels? 

CHART NO. 8 

Prices of wheat in England for 600 years, 1300 to 1900 

Description. — This chart is to show at a glance the history of 
the wheat market in England for the past six hundred years. The 
record of the first four hundred years is taken from Rogers' 
"Agriculture and Prices." That for the eighteenth century, less 
complete, is taken from Schoenhof's " History of Money and 
Prices." The nineteenth century record is from the report of the 
statistician of the United States Department of Agriculture. All 



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VIII. Prices of wheat in England, 1300-1890. Page 93. 



Hogs and Hams in Chicago 95 

are reduced with care to the basis of bushels and dollars and cents. 
The figures on the right and left show the price per bushel in 
United States money. 

Explanation. — The heavy horizontal lines show the average price 
luring a period of ten years, though in a few instances the period 
is longer. The diagonal lines show the extremes of fluctuation 
luring the period which they cover. During the first two hundred 
ind fifty years the coinage of England made the shilling in which 
prices were reckoned a much larger unit, practically three times 
is great as at present. The dots within circles indicate where 
che horizontal lines might have been had the unit been always the 
same. The same dots crossed cover a period of forty years in 
vhich prices are somewhat uncertain, from transition between the 
)ld standard and the new. -The beginning of the nineteenth 
^entury shows a remarkable condition of the wheat market, due 
diiefly to the wars in which England was engaged, together with 
ssues of paper money affecting the standard of value. The record 
s especially interesting from showing, first, the great fluctuations 
latural from unequal seasons ; second, the gradual increase in cost 
|)f production under the law of diminishing returns; third, the 
effects of changes in money legislation ; fourth, the effect of extra 
:onsumption in times of war ; and fifth, the effects of the present 
vorld-wide commerce in overcoming the law of diminishing 
Returns. A more complete record for the eighteenth century 
vould add to the interest, if not to the effectiveness of the chart. 

Relation towages. — For convenience of comparison, the average 
irice of wheat in France during periods of twenty -five years, as 
riven by Schoenhof, is added by dotted horizontal lines. The 
louble line across the chart indicates the range of average day's 
vages of house mechanics in England, without indicating the 
xtreme of fluctuations. It seems evident that wages and subsist- 
ence have something in common. 

CHART NO. 9 
Prices of live hogs and green hams in Chicago, 1884 to 1897 

General description. — This chart exhibits the* fluctuations in 
brices of live hogs and green hams as shown by reports of the 



Prices of Hogs and Pork 97 

Chicago Board of Trade from September, 1884, to August, 1897, 
together with the visible supply of live hogs in the market from 
month to month and for the entire year. The figures to right and 
left give dollars per cwt. of live hogs, and per barrel of green hams. 
The figures upon the upper third of the chart, right and left, 
indicate the number Of thousands of live hogs received in Chicago 
during the successive months, as indicated by the dark lines. The 
figures at the top of the chart under the date line give the number 
of thousands of hogs received during the entire year. The year is 
taken from September to August following, because the hog crop 
is in large measure dependent upon the corn crop coming into use 
in September. 

Prices of live hogs. — No. 3, irregular line, gives the fluctuation 
of top prices in every month from September, 1884, to August, 
1897, for fat hogs. The total range is between $3.30 per cwt. in 
September, 1896, and $8.80 in February, 1893. A somewhat strik- 
ing general correspondence is readily seen between this line of 
prices and a line connecting the ends of the lines indicating the 
monthly supply of live hogs at the top of the chart. The average 
price of the year is easily seen to be low when the supply for the 
year is high, and high when the supply is low, though in some 
instances the effect of an increased supply is evidently anticipated 
in the prices. Thus, an increase of 2,000,000 of hogs in 1889-90 
over the supply in 1888-9 is anticipated by falling prices 
during the early part of 1889. In a similar way, the effect of a 
diminished supply in the summer of 1895 is not so marked upon 
the prices as might have been the case had not the prospect been 
strong for a large supply in the fall of 1895. Whatever influence 
the local manipulation of the market may have had, it is perfectly 
evident that conditions of supply and demand have overwhelming 
influence. 

Prices of green hams and mess pork. — No. 2, giving the range 
of prices per barrel of green hams, shows fluctuations in some re- 
spects corresponding to the prices of live hogs, but with variations 
due in a measure, undoubtedly, to speculative interests in these 
products. The range is from $6.60 in December, 1897, to $13.80 
in. May, 1893, corresponding with the range in the prices of liv© 



98 Rural Wealth and Welfare 

bogs. Were there room upon the chart, it would be easy to show, 
an almost exactly corresponding fluctuation in the prices of mess 
pork, which article is one affected largely by speculation, though! 
even that speculation is dependent upon prospective supply and 
demand. The prices of mess pork at the New York Produce 
Exchange during the same period ranged from $9 a barrel ini 
1885-6 to $15.80 and $15.60 in 1887-8, $14.20 in 1889-90, $11.75 
in 1891, $14.20 in 1892, $22.60 in 1893, and gradually down to 
$7.25 in 1896-7. 

CHART NO. 10 

Prices of hogs and j)ork products at Chicago Board of Trade fo* 
1892-3 and 1896-7, the highest year and the lowest year 

Annual fluctuation, 1892-8. — This chart presents a comparisonl 
between the prices of live hogs, fresh hams and mess pork in thej 
year of highest range, with the prices of the same in the year of 
lowest range. The figures on the left indicate the prices per cwt. 
of live hogs and per bbl. of green hams and mess pork. No. 1 
gives, in the dotted line above the date figures, the highest price 
of mess pork in each month of the year, while the dotted line 
below the date figures gives the lowest price for the correspond 
ing months. The range in any month is found in the distance 
between the heavy dots on the line following the name of the 
month. Thus the highest price in April, 1893, is $19.35, and 
the lowest price in the same month, $15.50. The range throughout 
the year is from $21.80 in May to $12 in August. No. 2 gives 
the same facts with reference to the prices per barrel of green 
hams; and No. 3 gives the corresponding facts as to prices ol 
live hogs. 

Annual fluctuation, 1896-7.— Nos. 4, 5 and 6, marked by morj 
distinct lines, show the range of prices for these three related) 
articles of commerce for the year 1896-7. No. 4 gives the prices 
of green hams, which in this year averaged higher than the 
prices of mess pork, although the fluctuations of mess pork are 
the greater. At the top of the chart are given in thousands the 
number of live hogs received in Chicago during the two years, 




Prices of hogs and pork at Chicago, 1892-3 and 1896-7, highest and lowest 

year. Page 98. 



100 Rural Wealth and Welfare 

On the right of each month are the numbers for 1892-3; .on the 
left the numbers for 1896-7. The lines connecting the shaded 
portion show the fluctuations from month to month in the supply. 
A general, though not a perfect, correspondence is perceptible. 



CHART NO. 11 

Annual fluctuations in fork prices in Chicago — average 
of fifteen years 

Average annual fluctuations. — This chart is intended to show 
the annual range of prices as shown by reports of the Board of 
Trade of Chicago, from September, 1883, to August, 1897. The 
figures, right and left, give prices per cwt. of live hogs, and per 
barrel of green hams and mess pork. The figures opposite the ; 
shaded lines at the top indicate receipts of live hogs in thousands,- 
by the average in each month, for the fifteen years. The year is 
taken from September to August following, for correspondence 
with the crop year, as in previous charts. j 

Explanation. — No. 1 gives in the upper continuous line the i 
average of top prices for mess pork in successive months ; and in 
the lower line the average of bottom prices for the same months. 
The long, diagonal lines show the extreme of fluctuations in each 
month during the entire fifteen years. Thus the lowest price 
reached during the month of April in any year was $8.05, while i 
the highest was $25.50. The lowest price in November of any 
year was $6.40, while the highest price in the same month was 
$15.50. No. 2 gives in the same way the average of top prices and 
bottom prices during the fifteen years for green hams ; and by its 
diagonal lines, the extremes of fluctuation. No. 3 presents a cor- 
responding showing of average top and bottom prices of live hogs, 
with extreme fluctuations. No. 4, at the top of the chart, gives the 
average receipts of live hogs in Chicago during the several months 
of the year, counted in thousands. 

The supply of hogs. — The correspondence between the re- 
ceipts of live hogs and the average market price in each month 



HOGS, 




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XI. Annual fluctuation of prices of pork in Chicago, 15 years. Page 100. 



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Prices of Cattle and Beef 103 

is worthy of study. Every farmer can see in what months of the 
year the market is fullest. It is also evident that the fluctuations 
in mess pork are much more extensive than in live hogs or fresh 
products. This is doubtless due to the possibility of speculation 
in a product which can be held for future market. Nevertheless, 
it is quite evident that the prices of mess pork have some direct 
connection with the supply available. 



CHART NO. 12 

Prices of cattle and mess beef in Chicago, 1884 to 1897 

Description. — This chart is planned to show the prices of 
cattle and the prices of mess beef from month to month from 
September, 1884, to August, 1897, together with the supply of 
cattle received in Chicago in each month and for each year. The 
figures right and left on the lower part, give in dollars the prices 
per hundred pounds live weight, and per barrel of extra mess beef. 
Above, to right and left, the figures indicate thousands of live 
cattle received in Chicago. 

Explanation. — No. 1 gives the lowest price in successive 
months of lowest quality of beei steers. No. 2 gives the highest 
price in successive months for stock cattle. No. 3 gives the 
highest price in successive months for best quality of beef steers. 
No. 4 shows the fluctuations in the highest price per barrel of 
extra mess beef from month to month. No. 5 shows, by length 
of lines in each month, the receipts of cattle in Chicago by thou- 
sands. No. 6 gives the number of thousands of cattle received in 
saeh year. As in previous charts, the year runs from September 1 
bo August of the year following, though the relation of the beef 
market to the crops of the year is not so marked as that of the 
pork market. Although the correspondence in prices between 
;hese various parts of the cattle trade is not absolute, it is too 
striking to be consistent with independence of causes. The price 
}f stock cattle has some elements not found in the price of beef 
cattle ; and the price of lowest quality of beeves for canning 
purposes is naturally more uniform than any other prices. 



104 Rural Wealth and Welfare 

CHART NO. 13 

Annual fluctuation in prices of cattle and beef, Chicago, 1883 to 1897 

Explanation. — This chart is intended to illustrate the changes 
of prices in successive months upon the average of fifteen years, ■ 
as to stock cattle, beef steers, mess beef and beef hams. The 
data are taken from the daily records of the Chicago Board of 
Trade, from September, 1883, to August, 1897. The figures to 
right and left indicate prices in dollars per hundred pounds live 
weight, and per barrel of beef products. No. 1 indicates the range 
of prices for beef hams. The upper line gives the average of 
highest prices in each month for fifteen years. The lower line 
gives the average of lowest prices for the same period. The 
diagonal lines give the extremes of prices within the fifteen 
years. 

Mess beef and beef steers. — No. 3 gives the average of highest 
and lowest prices for mess beef. Nos. 4 and 6 give respectively 
the average of highest and lowest prices for beef steers. The di- 
agonals give the extremes for beef steers during the entire period. 
No. 5 gives the average of highest prices for stock cattle. 

Supply of cattle. — In the center, No. 2, is given the average 
receipts of cattle in the Chicago market for each month. The 
unshaded portion at the end of the lines, represents the average 
reshipment of cattle. Thus September, on the average, brings < 
265,000 cattle to Chicago and r.eships 90,000 ; while October • 
brings nearly 283,000 and reships 82,000. 

Peculiarities of mess beef market. — It will be noticed that the 
prices of beef hams give an annual curve, entirely distinct from h 
either of the others. This indicates the fluctuation in demand I 
entirely out of keeping with the supply. It is quite possible that 
the opening and closing of navigation upon the Great Lakes may " 
be an important influence. Certainly the change of the season i 
between cold and heat is an important element, since the lowest t 
month, and that of least fluctuation, is December. The month > 
of highest prices is August, and those of greatest fluctuation are ) 
May, June and September. The curve of prices for mess beef has 
a fair correspondence with the numbers of cattle slaughtered in 




XIII. Annual fluctuation in prices of cattle and beef in Chicago, 
1883-1897. Page 104. 



106 Rural Wealth and Welfare 

Chicago. The line indicating top prices of beef cattle has pecu- 
liarities of its own, because it stands for quality as well as quan- 
tity, representing the fancy lots, which are necessarily somewhat 
more irregular than the average. The line of prices for stock 
cattle is evidently affected b} r the variations in demand by feeders. 
The line of lowest prices for beef cattle, No. 6, is quite probably 
affected by quality as well as supply. 



CHART NO. 14 
Prices of iron, kerosene, etc., 1867 to 1896 

Description and Explanation . — This chart gives the prices from 
year to year for steel rails, bar iron, pig iron and nails in the 
New York market, each dot indicating the average for the year. 
The average prices for the corresponding years for refined kero- 
sene are also shown. No. 1 gives prices per ton of steel rails, into 
which enters all the influence of the improved methods of manu- 
facture. No. 2 represents the prices of bar iron per ton, less af- 
fected by improvements but influenced by the substitution of steel. 
No. 3 gives the prices of nails per thousand pounds. For com- 
parison with the other prices of iron, the prices of nails must be 
doubled. All will realize the immense improvements made in the 
manufacture of nails. No. 4 gives the prices per ton of pig iron. 
It is evident that all these forms of iron and steel have stood in 
the market under the same general influences, with slight modifi- 
cations from special characteristics of production or use. No. 5 
gives the average price in each year for one hundred gallons of 
refined kerosene oil. The price per gallon can be found by read- 
ing the figures as cents instead of dollars. In the same way the 
price of ten pounds of nails can be found. It should be said, 
however, that all these prices are the wholesale prices, retail 
prices being subject to local influences, sometimes even to custom, 
which prevents their adhering closely to the prices in larger 
markets. 

Even monopoly affected. — These articles have been chosen as 
illustrating the essential law of prices even under the advance of 



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XIV. Wholesale prices of iron, kerosene, etc., New York, 1867-1896. Page 106. 



108 Rural Wealth and Welfare 

combination of capital upon aii enormous scale. The iron in- 
dustries and the Standard Oil Company come nearest, perhaps, to 
fulfilling the conditions of monopoly found anywhere. Yet the 
actual effect of improved methods in great combinations is seen to 
have reached the mass of the people in spite of any tendency 
to sustain prices by combination. A line, No. 6, indicating the 
general trend of wages for farm hands in the North, is added to 
more clearly indicate the distribution of welfare through such 
improvements in method. For still other purposes, the fluctuating 
price of silver bullion is shown in line No. 7. 



CHAPTER X 

EXCHANGE— ITS MACHINERY 

Free communication. — From what has been said in 
the preceding chapter as to the nature of value and 
price, it will appear that the most fundamental condi- 
tion for ready exchange is perfectly free communication 
between individuals as to wants and abilities to meet 
wants. There is implied, also, an absolute protection of 
property rights and of equity in dealing through the 
laws and customs of the community. No one acquires 
property for the purpose of exchange unless he can 
foresee the possibility of carrying out the exchange at 
any future time. He must also feel that he is protected 
by surrounding circumstances from misinformation as to 
values. In short, any community is ready for free 
exchange among its members only when it maintains the 
conditions for fair competition. To this fairness of 
competition many things contribute, aside from the gov- 
ernmental machinery. There can be little trade without 
a common language, and the full advantages of common 
speech are reached through every facility for ready com- 
munication between all the individuals of the com- 
munity. An universal press, postal facilities, telegraph 
and telephone systems have all grown up in meeting 
this need, 

(109) 



110 Rural Wealth and Welfare 

The same is true of established market places, boards 
of trade and produce exchanges. Not only does the 
multitude of exchanges in one place lessen the cost of 
such exchanges, but these make it possible for multi- 
tudes to reach a fair understanding of what is wanted 
and what is offered in any line of production. This 
need accounts for the tendency so frequently noticed to 
establish great centers of trade in particular com- 
modities. The world wants a fair understanding of 
what the world contains, and these methods of bringing 
together buyers and sellers are the natural outgrowth 
of this need. 

Full statistics. — The same end is served still more 
fully by frequent publication of price-lists, and a daily 
record of the transactions in any market gives informa- 
tion which every dealer can use to advantage. Public 
statistics, carefully and honestly prepared, serve both 
buyers and sellers of any article of commerce. The 
farmer needs as much as anybody the fullest informa- 
tion as to what his fellow farmers have to sell, whether 
they are immediate neighbors or in distant parts of the 
world. The price of wheat on any farm ought, if per- 
fect understanding is reached, to conform to the general 
law of supply and demand throughout the world, and 
the yield of wheat in Russia, India and South America 
affects the value of every bushel raised in our country. 

Every advance in the perfection of statistics and the 
rapidity of collection makes more certain the bargain of 
every producer and consumer. People have sometimes 
opposed the gathering of statistics for fear that large 
dealers and speculators may take unfair advantage from 



Full Statistics 111 

such information. But a careful consideration will 
show that managing of the market depends chiefly upon 
want of information on one side of the bargain. If 
farmers were as thoroughly informed as to the crops of 
the world as carefully collected statistics might make 
them, no false rumors could mislead them in selling 
their produce. The evident tendency toward more 
stable markets, as shown by the records of the last 
twenty years, is accounted for partially, at least, by the 
more perfect information available. If farmers them- 
selves would take interest in furnishing accurate 
estimates of the extent and condition of every product 
held for sale, they would in the long run reap the 
highest advantages of clearly understanding the supply 
and demand in the markets of the world. This would 
do more to destroy the demoralizing force of mere 
speculation than any possible legal enactment. 

Beady transportation.— An equally important part of 
the machinery of exchange is easy transportation. 
Every improvement in the transportation of persons or 
products not only lessens the cost of the article when 
delivered, but increases the actual stability of price and 
range of the market. 

The pioneer farmers of northern Ohio found abso- 
lutely no market for their wheat until the opening of 
the Erie canal. Farmers upon western prairies found 
corn their cheapest fuel until railway transportation 
brought coal mines and corn fields into closer rela- 
tions. The rural community which takes pains to 
have good roads not only lessens the cost of hauling 
grain to market by saving friction and toil, but actually 



112 Rural Wealth and Welfare 

enlarges its market at home. Hard roads enable them 
to do fonr times the work they can do on soft roads. 
In the same way any improvement of railroads, con- 
struction of pipe lines for gas and oil, or introduction 
of pneumatic tubes for mails and light packages in 
cities, directly spreads the range of market for the prod- 
ucts of every individual laborer and makes more sure the 
returns for any effort he may give in production. Per- 
haps this is even more easily seen by considering how 
the world's markets are opened by improvement in water 
transportation. Water freight on a bushel of wheat 
from Chicago to New York from 1865 to 1874 averaged 
over twenty -two cents; from 1885 to 1894 it was less 
than seven cents. 

The universality of markets for all kinds of products 
is clearly shown by realizing what we have within reach 
of every country community today. Such easy trans- 
portation adds to the productive abilities of every 
person. Over ordinary roads the cost of transporting 
wheat two hundred miles is equal to its value at the end 
of the journey. Corn will usually pay its way not 
more than half that distance. So in countries where 
railroads do not exist the people consume only what 
they themselves produce, or devote themselves to very 
few products, and so occupy only a portion of their time. 
In the best developed regions of our country, every 
family can reach a steady supply of all kinds of goods, 
and can know that every article produced has its proper 
place in the market without waste. The cost of deliver- 
ing bread in Boston is greater than the cost of carrying 
the flour in it two thousand miles, This ready trans- 



Beady Transportation 113 

portation leads to more complete and more definite 
occupation and so to larger returns in the way of satis- 
faction from all efforts. The extended market gives 
added value to all permanent or fixed capital. It makes 
both farms and homes more useful, if full advantage of 
such improvements is taken. At the same time, values 
of land tend toward an equality throughout the world. 

Diminishing cost of transportation. — That the cost 
of transportation keeps diminishing in spite of combina- 
tions of capital to prevent it, and in spite of local 
legislation restricting it, proves that the increasing per- 
fection of machinery and the accession of capital in 
railroads and waterways are stronger than the purposes 
of men. That freights are regulated by "what the 
traffic will bear " is merely another way of saying that 
transportation comes under the universal law of values 
— what the service is worth in the market, or what 
people are willing to give for it. According to good 
authority, the net profit of carrying one ton of freight 
one mile has fallen in twenty -five years from one cent 
to less than one -ninth of a cent. The same principle 
fixes a classification of freight according to service. 
We can afford to pay more for carrying valuable 
produce than for carrying cheaper products. It also 
leads to special rates for developing traffic, as illustrated 
in rates on baled alfalfa hay from western plains to 
Chicago. 

Wise managers, if not misled by speculation in 
stocks, care more for enlarging traffic than for im- 
mediate returns upon a smaller bulk, because the bulk 
iof profit is greater. A good illustration of development 

H 



114 Rural Wealth and Welfare 

of a special traffic is found in the milk trains running? 
two hundred or three hundred miles to supply the city^ 
of New York. The railroads are compelled by thei 
needs of the traffic to carry the milk cheaply enough to: 
prevent its being made into butter and cheese. Laws: 
regulating this charge are effective, because such a 
necessity exists in the nature of the case. 

Weights and measures. — Another important growth 
in the machinery of trade is found in standards of 
quantity, — weights and measures of every kind. It is 
scarcely possible to realize the uncertainty of exchange 
without exact weights and measures. The story of the 
Indian trader who bought furs by weight, putting his 
hand upon the scales for one weight and his foot for its 
double, illustrates how uncertain such judgments of 
quantity may be without system. The present names 
of weights and measures indicate their origin in similar 
ways. 

Measures have usually been connected with some 
part of the body: as "finger," used one way in measuring; 
the load of a gun and another on a stocking; "hand," 
still used in measuring the height of horses; "span," 
once considered sufficiently definite for an y measure- , 
ment ; "foot," now made to conform to au accurate 
system; and "pace," still used in many communities. 
Connected with the arm, are "cubit" and "yard." 
Many ladies still measure their dress goods by arm's i 
lengths. For small measures, "grain" and "barley- 
corn," still used as names, indicate dependence upon 
average quantity in articles of general growth. 

Today all civilized governments settle upon a defi- 



Weights and Measures 115 

nite system of measures and weights, all accurately 
connected with each other and with some precise dimen- 
sion in nature supposed to be invariable. Our common 
yard is distinctly associated with a pendulum vibrating 
seconds; and in the great decimal system, adopted by 
most countries in Europe, and likely to be reached in all 
countries, the whole is connected with a measured meri- 
dian upon the earth's surface. Care is then taken to have 
standard measures and weights prepared in such a way 
as to be free from all effects of any change of tempera- 
ture, and legal enactments distinctly define each meas- 
ure and weight, actually punishing one for the crime of 
using false weights or measures. Units of quantity 
thus enter into all our calculations and form an essen- 
tial basis of all exchange. Cheating in measure and 
weight grows less and less possible with this clear 
understanding of exact units. The New York Legis- 
lature has defined the size of fruit packages, and the 
Massachusetts poultry raisers ask a law requiring eggs 
to be sold by weight. 

Metrical system. — If the whole world should unite 
on a single decimal system of measures and weights, 
like that now used in most of Europe, all would be 
gainers from the reduction of misunderstandings and 
miscalculations increasing the cost of exchange. The 
difficulty of adopting a new system arises chiefly from 
the absolute importance of any system and the uncon- 
scious use of that to which people are already accus- 
tomed, together with its application in a thousand 
unth ought of ways to every tool and every rule. That 
the advantage of a uniform decimal system would more 



116 Rural Wealth and Welfare 

than balance the difficulty of change, no student of the 
subject now doubts. Some have estimated the saving 
at nearly one -half of the present clerk hire. Our 
government has already taken steps for such a change, 
though years may be required to accomplish it. 

Standards of quality. — The machinery of exchange 
also involves standard units of quality, but these must 
vary with every different kind of commodity. Custom 
has given rise to all sorts of devices for expressing de- 
grees of fineness, strength and hardness, as well as more 
delicate qualities of flavor and odor. Boards of Trade 
often establish offices of inspection with brands upon 
grains, flour, butter, pork, etc., and these become defi- 
nite parts of a contract which the government rightly 
enforces. Private trade -marks and brands, if honestly 
used, become a prominent element in exchange. These j 
are protected rightly by being filed with the government, 
which secures to the originator his sole use of such a 
proof of quality. 

In some articles of trade, when a whole community 
is interested, the government goes further and under- 
takes inspection and branding by an official. This in 
most states applies to kerosene oil, first for public 
safety, but afterwards for protection of exchange. Laws 
regulating the quality of fertilizers are based upon the 
necessity of knowledge, that bargains may be fair; and 
in many parts of our country now the branding of 
ground feeds, with an analysis of their qualities, is 
deemed an essential of safe bargaining. The extent to 
which this effort to establish the certainty of qualities 
may need to be carried can be estimated by the recent 



Standards of Quality 117 

agitation over adulterations of food products. All 
believe that, as buyers, they have a right to know the 
quality of what they buy. It is conceivable that 
markets may some time establish a system of terms, 
descriptive of qualities, almost as definite as weights 
and measures. All this contributes to fair competition 
in exchange. 

Standards of value. — More important still in the 
machinery of exchange is a standard unit of value. 
We have seen that value in any article of commerce can 
be fixed in terms of any other article, but prices remain 
indefinite so long as there is want of universal apprecia- 
tion or appraisal in essentially the same terms and 
ideas. The tendency toward definite prices in well 
understood units of value is as clearly perceptible in the 
progress of commerce as is the tendency toward defi- 
niteness in weights and measures. 

In early ages almost any article of common use, so 
that its qualities might be generally understood, has 
served as a standard of value, in terms of which all 
wealth has been estimated. Communities engaged in 
grazing counted all their wealth by cattle. Homer's 
heroes wore armor valued in cattle, and early Roman 
coins bore the images of cattle, while the very name of 
Roman coins, pecunia, is supposed to have been derived 
from the name of the flock. Communities of fishermen 
for a long period have estimated wealth in dried fish. 
More mechanical peoples have used some article of 
manufacture, like nails in some Scottish villages and 
the country cloth of western Africa. Sometimes a 
single prime article of export has served the purpose, 



118 Rural Wealth and Welfare 

like tobacco in the colony of Virginia and dried hides 
on the plains of South America. In most of pioneer 
America the hunters' pelts have served the same pur- 
pose, the average "coonskin" having a value which all 
could understand. As communities became more 
wealthy the display of wealth in ornaments made of 
precious metals and in precious stones has led to the 
use of these as standards of value. American Indians 
used their wampum, and African tribes employed pe- 
culiar shells. But as commerce increased, embracing 
wider regions, gold and silver became the staple article 
of value everywhere, since these, so easily tested for 
purity, could have their value estimated definitely by 
weight. Thus the standard unit of value has been 
definitely connected with standard weights. 

Coinage. — Gradually these weights, for greater ease 
of transfer and for clearer understanding of values, 
became the basis of coinage. The stamp of the coiner 
became a certificate of quality and quantity, and finally, 
as in the case of weights and measures, governments 
assumed the whole responsibility for fixing the weight 
and fineness of coins, and reduced all coinage to system, 
that every citizen might know the value of the unit in 
which he estimates any article of commerce. 

The early coins were definite weights of gold, silver 
or copper, and in many countries coins still bear the 
names that indicate their original weight. Yet arbi- 
trary rulers have often sought to cheat their subjects 
by issuing coins of lighter weight and baser metal. 
The French livre, now the franc, is one seventy -second 
of its original value. English coins were debased ten 



Systems of Coinage 119 

times between the years 1299 and 1601 to exactly one- 
third of their original value. The loss from such 
debasement falls almost wholly upon the poor, whose 
wages fail to buy the usual food and clothing. Henry 
VIII reduced the coins of his realm again and again, 
until it would have taken five years' revenue of Eliza- 
beth's reign to restore the currency. Elizabeth chose 
to take the standards as she found them, but to estab- 
lish an absolute degree of purity and fix by law the 
weight of each coin in the system. The standard of 
purity since maintained in England is 22 carats, or 
eleven -twelfths fine, and weights have been maintained 
in spite of several efforts to reduce them. Other nations 
have taken similar steps with varying standards of 
purity: ,835 in the Latin union, .9 in the United States, 
and over .96 in most coinage of western Asia. In this 
way the standard of value for every citizen of a country 
is as clearly defined as the standard of weight, and 
every transaction in trade, with every account of such 
transaction, involves that unit. 

United States coinage. — A brief statement of the 
system of coinage now established in the United States 
may illustrate the definiteness of the standards of value. 
The United States mint at Philadelphia and its 
branches at New Orleans, Denver, San Francisco and 
Carson have the sole authority for making coins. Any 
effort at coinage by outside parties is criminal. The 
mint receives the gold and silver by weight and assay of 
purity, melts and refines and mixes with alloy, to bring 
the mass to required fineness, nine -tenths pure, and 
casts the metal into bars called bullion. These bars are 



120 Rural Wealth and Welfare 

then most carefully assayed, and, if found of exact 
standard purity, are rolled and drawn into plates the 
thickness of the coins desired. From these plates disks 
are punched by machinery, each disk being weighed, 
and if found too light thrown aside, if too heavy 
reduced by filing, until every disk represents exactly 
the required weight of the coin desired. The disks 
then pass through a milling machine which raises the 
edges, and when cleaned by dilute acid and carefully 
dried, are stamped by a steel die with some device cov- 
ering both surfaces completely. This effectually gives 
the seal of the nation to the purity and weight of the 
coin, and, since it covers the whole surface, prevents the 
possibility of reducing that weight without marring 
the coin. 

United States standards. — The system of coinage in 
the United States since 1873 embraces standard coins 
of gold, silver, nickel and copper, but gold alone actu- 
ally furnishes the standards of value, all other coins be- 
ing at present subsidiary. Gold is coined for individuals 
free; that is, a certain weight of metal presented at the 
mint is assayed, to determine the exact weight of pure 
gold, and an equal weight of pure gold is returned to the 
owner in coin. Sometimes a slight charge for the ex- 
pense of coinage is made and called seigniorage. At 
present no such charge is made, for the reason that 
when a nation bears the cost of coinage, foreign coins 
are kept from circulation, and its own coins are current 
everywhere. 

The standard unit of value for the United States is 
25.8 grains of gold nine -tenths fine, and this is called a 



United States Coins 121 

dollar, although no coin of this weight is at present 
struck. In actual practice, the standard is shown in the 
ten -dollar piece, or eagle, weighing 258 grains. The half 
eagle (five dollars) and the quarter eagle (two dollars and 
fifty cents) indicate upon their face their relation to 
the principal coin. The double eagle, or twenty-dollar 
piece, is coined for greater convenience. These coins 
connect all the currency of the country directly with the 
market value of commodities in the world, through gain- 
ing their value directly from the market value of gold, 
where gold is bought and sold. Thus gold furnishes 
the standard of value with which all other values are 
compared. 

Silver coins of the United States are made from silver 
purchased by the government. The dollar, adopted from 
the Spanish rix- dollar, itself derived from the German 
thaler, is by law a coin of 412% grains of silver nine- 
tenths fine. This silver dollar has a story of its own, 
which will be given later, and does not form a part of 
the system of 1873. The half dollar, the quarter dollar, 
and the dime, for fractional currency, are proportional 
parts of 385.8 grains of silver nine -tenths fine. These 
are about five per cent less in weight than the propor- 
tional parts of the silver dollar. The original purpose 
of this reduced weight was to prevent the consumption 
of these coins in ordinary uses by making them worth 
on the face a little more than their bullion value. These 
fractional coins are legal tender in the courts to the 
amount of five dollars. In nickel and copper coins no 
ffort has been made for many years to maintain a stand- 
ard of value, the amount of metal in any of them being 



122 Rural Wealth and Welfare 

far less in value than their face. They are legal tender 
only to the amount of twenty -five cents. 

Fluctuation of standards. — In the study of the pre- 
cious metals as the standard of prices, it is necessary 
to remember that the value of these metals, like that of 
all products of labor, is subject to considerable fluctua- 
tions. The very fact that gold and silver are durable 
metals, not easily consumed or readily worn away, tends 
to make the increased product in a series of years less 
and less valuable. While the ordinary increase in prod- 
uct may be provided for by increased demand through 
extended exchange, the very improvements in the ma- 
chinery of exchange, especially the extension of general 
credit, operate in the opposite direction. 

It is certain that the value of gold and silver within 
one hundred years after the discovery of America, when 
European nations took possession of accumulations 
among the inhabitants of Central and South America, 
diminished to a little more than one -fourth of the 
value previous to that discovery. It is estimated that 
the value of gold since the discovery of 1849, in Cali- 
fornia, followed by the opening of mines in Australia 
and South Africa, has been reduced to little more than 
three -fifths of its value in 1850. This estimate is based 
upon careful comparisons between what an ounce of 
gold in 1850 would buy of some hundred staple pro- 
ducts, and what the same ounce of gold will buy today 
of the same hundred products. The test is a somewhat 
uncertain one, from the fact that many products are much 
more affected by improved methods of production than 
others, and changes of habits and customs among the 



Fluctuation of Standards 123 

people greatly affect the prices by changing demands. 
The combination of a large nnmber of products being 
less likely to be affected than any one, the comparison 
is worthy of some confidence. Nevertheless, it is pos- 
sible for two different persons, making different selec- 
tions for comparison, to arrive at very diverse results. 
If the selected articles are those of ready manufacture 
where improved methods have most largely entered, the 
value of gold will seem to have increased ; if, on the 
other hand, the selected articles are raw materials, in 
which the law of diminishing returns gives greater cost 
of production, the value of gold will seem to have 
liminished. 

A test easily applied, though not absolutely correct, 
s in the amount of labor of the most common sort 
vvhich an ounce of gold would pay for at the different 
periods compared. Careful comparisons show that an 
Imnce of gold today buys more of all sorts of manufac- 
tured articles and more of most articles of food, though 
ess of the better class of meats and less of labor, than 
)vqv before. This fluctuation in the value of gold has 
ts chief importance in connection with long extended 
credits, though its influence is felt in other directions 
hrough a common system of accounts, in which the 
standard unit of some system of coinage is the sole basis 
)f comparisons. If the standard unit is growing less 
valuable, in a series of years the book-keeper will show 
i constantly increasing total of wealth; if, on the other 
land, it is growing more valuable, the books will show 
in apparent loss. Were a perfectly uniform standard 
>ossible, all interests would be best provided for. 



124 Rural Wealth and Welfare 

Ratio of silver to gold. — More directly important im 
its effect upon exchanges is the unequal fluctuation of I 
gold and silver when both are made the standard of 
value. That silver and gold are from independent 
sources, subject to variations of their own in product 
and processes of extraction, makes it impossible that 
they should sustain always the same ratio to each other 
in value. 

. A careful study of the subject by Professor Rogers: 
shows that early in the thirteenth century one pound of 
gold was worth ten pounds of silver, at the close of 
that century would buy twelve and one -half pounds of 
silver, and in the middle of the fourteenth century bought 
thirteen and three -fourths pounds; but in the fifteenth! 
and sixteenth centuries, after the new world was 
pillaged, one pound of gold bought from ten and one-^ 
half to twelve pounds of silver. In the seventeenth! 
century fifteen pounds of silver went for one pound oj 
gold, and in the eighteenth, fifteen and one-half pounds. 
Early in the nineteenth century the ratio was fixed in 
this country at sixteen of silver to one of gold, and 
that estimate was assumed to be essentially correct as 
late as 1877, when a pound of gold would exchange in 
the market for three and one -half pounds of platinum.! 
seven pounds of aluminum, sixteen pounds of silver; 
seventy -one pounds of nickel, 942 pounds of tin, 1,696( 
pounds of copper. Twenty years have produced great 
changes in both the total annual products and the 
relative cost of mining. The estimate of 1877 would 
now be incorrect for any of the metals named. A 
pound of gold now buys 1,540 pounds of aluminum, the 



Ratio of Silver to Gold 125 

shange being due to an invention for reducing aluminum 
ore. It now takes about thirty -seven pounds of silver 
to pay for one pound of gold, a change in. part due to 
aew systems of coinage in which silver plays a sub- 
Drdinate part, but chiefly due to the greatly increased 
product of rich mines and greatly improved methods of 
reducing ores. 

The cheaper money drives out the good money. — In any 
system of coinage, employing both silver and gold as 
standards, it is found by actual experience, repeated 
hundreds of times, that a change in the ratio between 
the two metals in open market always leads to hoarding 
for speculative purposes of the most costly metal of 
the two. 

Thus, in our country previous to 1873, when silver 
fcvas worth more than one -sixteenth of its weight in 
bold, uncoined silver was necessarily worth more than 
poined silver for some purposes, and the coins already 
struck were worth more in the manufacture of spoons 
ind plate than to circulate as coins. Prior to 1853, 
when the half dollars, quarter dollars and dimes were 
joined at the ratio of sixteen to one, such coins could 
iot be kept in circulation, for the reason that they were 
jvorth more than their face value. The law of 1853 
[•educed the weight of these coins so that their market 
7alue as silver was sure to remain a trifle less than their 
:ace value. The result was no further melting up of 
these small coins for use in the arts or for bullion. This 
fact is only one illustration of what is called Gresham's 
iaw, formulated in the time of England's base coinage 
uring the sixteenth century, but noticed centuries 



126 Rural Wealth and Welfare 

earlier, that cheap money always drives out a more costly 
money. The principle is as constant as human nature, 
that nobody will give a greater value when a less value 
will serve the same purpose. For this reason, no 
country in recent times has been able to keep both gold 
and silver as the actual standards of value at the same 
time. Either the ratio must be changed with every 
fluctuation of either metal, or one of the metals must be 
undervalued in the system of coinage, as has been done 
in England for the greater part of this century; or else 
the total coins of the cheaper metal must be limited in 
amount, as has been done by the Latin Union in Europe 
during the last twenty -five years. In either case the 
tendency is toward a single standard. The commercial 
world prefers a stable, well understood unit to a change- 
able one. And while the fluctuations of gold alone 
affect somewhat the stability of prices, these are thought 
of less importance than the necessary legal adjustments 
for new systems of coinage. 

Monometalism and bimetalism. — The discussion has 
led to two opposing views, distinguished as mono- 
metalism and bimetalism. The monometalist holds 
that since one metal only can, under ordinary circum- 
stances, set the standard of price, it is wise to choose 
the one subject to the least fluctuation for the universal 
standard. The bimetalist holds that a nation, or at any 
rate a group of nations, can fix by agreement the price 
of gold and silver in terms of each other, when used 
as money. Since the use of these metals as money 
makes the chief demand for them, it is thought possible 
to make this legal ratio hold upon the total product of 



MonometaMsm and Bimetalism 127 

both gold and silver. If, then, in any country the supply 
of gold should be out of due proportion with silver, its 
overvaluation will at once attract gold from other 
countries until it becomes no more profitable there than 
elsewhere. The result is assumed to be a somewhat 
ready equalization of values for the territory establish- 
ing the standard, so that the actual fluctuations of the 
standard unit will follow the line of lowest prices for 
either of the metals. The monometalist feels certain 
hat the actual withdrawal from circulation, and so from 
use as money, of the higher priced metal causes greater 
lardship and probably greater fluctuations in values of 
3ther commodities than any fluctuation of a single 
standard can produce. 

It is very certain that the commercial world 
recognizes the tendency toward a single standard, and 
;hat the coinage systems of all civilized countries are 
bractically, if not in definite form, based upon a single 
tandard. The countries of wide commerce and exten- 
ive credit are using the gold standard. The less 
leveloped countries adhere to the silver standard. 
Many which nominally sustain both have, by some 
egal restriction in the coinage of silver, become prac- 
tical supporters of the gold standard. Few, if any, 
thorough students of the subject believe it possible by 
statute in the present conditions of mining and com- 
nerce to bring the commercial world anywhere back to 
:he ratio of sixteen to one, established in the United 
States in 1834. Statute law might declare a sheep to be 
jqual to a horse, but no power on earth could make it 
Dull as much. So even agreement among nations, by 



128 



Rural Wealth and Welfare 



legal enactments, cannot enforce an unnatural relation 
between two products. 



NATIONAL STANDARDS OF VALUE, 1899 



Gold 


Gold, tvith silver 
limited 


Gold or silver 


Silver 


Great Britain, 


United States, 


Haiti, 


Mexico, 


Germany, 
Sweden, 
Norway, 
Denmark, 


France, 
Belgium, 
Italy, 
Switzerland, 


Uruguay, 
Argentine Re- 
public, 
Venezuela, 


Central Amer- 
ica, 
Colombia, 
Bolivia, 


Aus tr o-Hun- 


Greece, 


Spain, 


Peru, 


gary, 
Eoumania, 
Turkey, 
Portugal, 
Brazil, 


India. 


Servia, 

Bulgaria, 

Netherlands, 

Algeria, 

Tunis, 


Equador, 

China, 

Hong Kong and 

Straits, 
Cochin China. 


Canada, 
Newfoundland, 




Japan, 
Java, etc., 




Egypt, 
Russia, 




Philippine Is- 
lands, 




Chile. 




Hawaii. 





Actual bimetalism. — It is necessary to caution 
against supposing that the use of both gold and silver 
as currency in any country implies true bimetalism, nor 
is it at all certain that the making of either gold or 
silver legal tender at option touches the question of 
bimetalism . Only the issue by free coinage at the will 
of the owner of both metals shows a distinct attempt to 
maintain bimetalism. The actual maintenance of both 
standards has always been, and always will be, by 
alternation, when the ratio of the two metals as to 
value is established at very nearly the market value of 
the two metals in bullion. 



Actual Bimetalism 129 

Popular demand for a return to the old ratio in the 
United States is founded in part upon misconception of 
commercial principles and largely upon a misunder- 
standing of current events during a financial crisis. 
The supposed dangers from a single standard of value 
are largely exaggerated from confusion of standards 
with currency in exchange. It is quite conceivable 
:hat gold may still serve as a standard unit of value, 
while 90 per cent of exchanges have no other use 
cor gold beyond its furnishing terms of comparison. 
We must measure value by value, and the unit of value 
nust be true to its name, just as we measure length by 
something long. But the number of yardsticks in 
ictual use in a store may have no constant ratio to the 
lumber of yards of cloth sold by that measure. The 
:olding of calico in yard folds relieves the yardstick, 
3ut does not change the nature of the yard. So gold, 
[>r silver, is relieved of many functions in exchange 
;hrough banking systems without materially affecting 
ts use as a standard unit. 

The multiple standard. — It is proper to mention in 
connection with units of value a theoretical device for 
>vercoming the necessary fluctuation in all articles of 
falue. This is sometimes called the multiple standard. 
The plan, in brief, is to appoint a committee of experts, 
whose record of current prices, in some general market, 
:or a hundred or more staple articles of commerce, shall 
oe compared from week to week, or day to day, in such 
i way as to indicate how far above or below the average 
jhe price of any article may be. If, then, gold is made a 
egal tender, a comparison of its price with the average 



130 Rural Wealth and Welfare 

of all prices will show how much weight of gold mustr 
be given on any day to actually return a value exactly, 
equivalent to what was borrowed sixty days or a yean 
previous, when the ratio of gold to average prices waft 
different. In this way it is supposed that natural fluc- 
tuations in gold, silver or any other commodity made 
legal tender for debt can be fully provided for without! 
loss to either debtor or creditor. 

The objections to this ideal standard are the prac- 
tical difficulty of settling, first, the wide range of com- 
modities to serve as the basis; second, the importance 
to be given each in adjusting the standard; and third, , 
the nature of the commission under which the workv 
should be done. In the history of the world, cus- 
tom has preceded law in devising for welfare; in 
this, law without experience will have to precede cus- 
tom. The difficulty which most men would experience 
in understanding and trusting such a system puts off 
indefinitely the possibility of a general adoption. 

The currency. — The last essential in perfect freedom 
of exchange is a satisfactory means of transferring com- 
pletely and quickly all property right in any article off 
trade. Exchange of commodity for commodity or ser- 
vice for service is possible to a very limited extent, since 
the man who wants my horse may have nothing which II 
want in return, or if he has, the values may be unequal, , 
and one or the other must remain in debt, which means ; 
that one of the articles belongs in part to both. In i 
some new countries exchanges are confined to this slow 
and uncertain method of barter, where nobody can buy ; 
until he finds a neighbor wanting just what he himself 



The Currency 131 

has to sell. Traders in such countries contrive to accu- 
mulate a variety of things needed by all sorts of people, 
that they may be ready with some kind of exchange to 
meet particular wants. No community, however, begins 
to reap the clear advantages of exchange until some 
universally acceptable medium of exchange is discovered 
and accepted. The process of developing this medium 
is essentially the same as that described in establishing 
a standard of value; and so the word money naturally 
represents both the standard of value and the common 
currency of trade. It is easy, however, to see by fur- 
ther examination that the two functions of money are 
quite easily separable, and that, while it is difficult to 
substitute for the standard of value, a variety of substi- 
tutes can serve as currency. 

In speaking of coinage hitherto, the standard of 
value has been assumed to be the most important, but 
in fact a large proportion of our coin serves simply as 
currency without materially affecting the standard of 
value. This is true of all the fractional coins, which 
are purposely over -valued, and equally true of the silver 
dollar under existing circumstances. In fact, the pri- 
mary use of coin was simply for the purpose of trans- 
ferring property. In the words of Aristotle, 350 B. C, 
Men invented among themselves, by way of exchange, 
something which they should mutually give and take, 
and which, being really valuable in itself, might easily be 
passed from hand to hand for purposes of daily life." 
This coined money supplies the needed means of ex- 
change most readily because it carries its value with it. 
[n all civilized communities, and in many only partially 



132 Rural Wealth and Welfare 

civilized, it is readily exchangeable for any article of: 
commerce. It is also valued in proportion to its weight, 
so that any bulk in gold or in silver may be easily 
divided by exchange for smaller coins. With a little; 
painstaking the coins are made identical in value, so that: 
every trader knows what he gives and receives. They 
are exceedingly durable, resisting almost all the forces of 
nature with little loss. For this reason they are likely 
to have an almost universal value, that is to be wanted! 
by everybody, in any place, at any time, and under any 
circumstances. These facts are proved by the tendency 
to hoard such coins whenever individuals have a surplus i 
of wealth beyond present wants, or whenever there is risk 
in using wealth as capital because of distrust of govern- 
ment, of individuals or of future enterprise. A buried 
treasure is almost sure to be in the form of coins. 

Under a system of coinage, inequalities in exchange 
are easily adjusted, like "the boot" in a horse trade, 
or the balance between produce carried to the store and 
the articles carried away. Most of all, coin is used 
where for any reason there is distrust of the future. 
Coin, or its equivalent in bullion, is needed in all trans- 
actions where credit is wanting. This appears promi- 
nent in all lawless communities with a fluctuating popu- 
lation, and may be found in ignorant communities where • 
methods of credit are not established. It is often essen- 
tial in the settlement of claims between hostile coun- 
tries, and is the final means of adjusting balances in all 
foreign trade. Occasionally this need appears in a uni- 
versal panic, where each man takes his fellow by the 
throat, saying, "Pay me that thou owest." 



Coin a Country's Capital 133 

Coin a part of a country's capital. — The coined 
money of a country thus becomes wealth in store for 
constant use as a machine of exchange. Its operation 
is effective when it keeps in constant motion, being 
itself consumed very slowly in the wear and tear of mo- 
tion. It is sometimes compared to an endless screw, 
transmitting motion to everything else with which it 
comes in contact. Like other machines, it may be 
either too abundant or too scarce for the best advantage 
of the country. In either case there is waste. When 
the coin is idle it is unproductive, but suffers less 
waste from deterioration than almost any other kind of 
machine. In case of scarcity the cost of its use is in- 
creased under the general law of supply and demand, 
exactly as the cost of other machinery in use is advanced 
when many desire to use it. This machine is a promi- 
nent part of the capital of a country, greater in some 
countries than in others. In France the value of coin 
is estimated to be 3 per cent of the value of all real 
estate, including buildings. The use of such a machine 
makes a material part of the annual cost of exchanges. 
The coin of England, where interest is comparatively 
low, costs for its use in interest, wear and tear, and re- 
coinage more than $20,000,000 annually. 

An additional cost to individuals is in the extra risk 
of carrying such wealth, as shown in express charges 
and special insurance, and still greater expense for safe 
keeping, and a considerable use of time in counting. 
These facts have led to many devices for lessening the 
need of keeping wealth in this form. 

Credit by accounts. — The most obvious method of 



134 Rural Wealth and Welfare 

avoiding the use of coin in exchanges is a current ac- 
count between individuals having many transactions in 
trade. A farmer carries his butter, eggs, fruits, grains . 
and live stock, perhaps, to a single dealer in all these i 
articles, and takes in return articles of household use or* 
for any necessity as he requires them, from a spool of 
thread to a harvester. If both keep accurate accounts, 
a settlement once in six months satisfies most conveni- 
ently all the requirements of perfect trade. Indeed the' 
settlement is needed only that the accounts may be veri- 
fied. Except for the dangers of waste in unlimited 
credit and carelessness in expenditure where future i 
wealth is drawn upon, this method of exchange is 
simple and inexpensive. In the nature of the case, how-/ 
ever, it must be limited, for safety, to trade between 
people having confidence in each other's honesty of pur- 
pose and ability to keep correct accounts. It also re- 
quires a mutual expectation of ability on the part of 
either to meet indebtedness at any future time of 
settlement. 

Credit by due-bills. — An extension of this credit in 
well established countries, so as to take in other persons i 
than the two involved in book account, is found in due- 
bills, notes of hand payable on demand, or more formal 
securities, any of which may require a final decision in 
court. These pass from hand to hand, often in connec- 
tion with coin, and under ordinary circumstances serve; 
their purpose cheaply. In some countries a note of : 
hand, with endorsement of each user, may make ex- 
changes until it is covered with endorsements. The 
danger of waste is considerable from the impossibility of 



Credit by Due-bills 135 

knowing the financial standing and honesty of the 
various endorsers, and the system is limited, of course, 
to the range of confidence in such trustworthiness. So 
easy is it to extend this credit of individuals beyond the 
range of safety that most governments have found it 
necessary to protect their citizens against its dangers by 
limiting or prohibiting its use as currency. 

Credit currency. — So convenient, however, and so 
economical is the use of credit, that all well established 
nations have developed systems for the issue of a credit 
currency founded upon the stability of strong corpora- 
tions or upon the national credit. Nations themselves 
have often issued bills of credit in the form of notes, or 
promises to pay at the national treasury. If these are 
payable on demand in the coin of the realm, they are 
said to be redeemable. If the time of payment is uncer- 
tain, or indefinitely postponed, they are said to be irre- 
deemable. Thus we have the many forms of paper 
money so familiar to everybody and the various practices 
and speculative theories regarding it, which make a large 
part of the discussion of financial questions throughout 
the world. 

No one doubts the worthlessness of currency in any 
form of note, from individual or firm, which cannot be 
paid when presented. The notes of the government, 
so long as that government is considered stable, may 
circulate readily, and even after doubts exist as to the 
(final ability of the government to redeem, they still cir- 
culate, perhaps with greater readiness, in the feeling that 
hoarding is utter loss and the stopping of trade in the 
ordinary perishable products of industry will be an enor- 



136 Rural Wealth and Welfare 

mous disaster. This feeling often leads to the nse of a 
currency without value, like the token money used for 
change in the absence of legal coins. Though nobody 
is bound to redeem these tokens, everybody takes the 
risk of loss as less disastrous than no exchange. Paper 
money issued by corporations is universally considered 
dangerous to the interests of communities, unless very 
carefully restricted within distinct and clearly under- 
stood limits. The discussion of such issues will be 
given in another chapter devoted to banking. The issue 
of paper money by governments has been a frequent 
device for enforcing contributions of citizens to extraor- 
dinary expenses in war or other disaster. A history of 
such issues cannot be given within the limits of this 
book, but is well worth the study of those who seek an 
understanding of the powers and limitations of govern- 
ment under natural laws, in making a satisfactory cur- 
rency. A government's stamp upon the piece of paper 
is so far good, and only so far, as it secures to the 
receiver of the paper an equivalent value to what he 
gave for it. If the government itself is unable to give 
that value, it can never insure the ability or the willing- 
ness on the part of any individual to give such value. 
While millions of dollars in such form may serve as 
currency without any deterioration, as at the present 
time, when government promises in all the various forms 
amount to nearly $1,000,000,000, should any of these, 
on any day, be refused payment for want of means in 
government possession, every individual in the land 
would feel that the value of his possessions in the shape 
of such notes was made just so far doubtful as the 



Credit Currency 137 

chances of redemption are postponed. All issues of 
such notes at once become certificates of debt rather 
than credit, and lose, to greater or less extent, their ex- 
changeable value. 

In the extraordinary issue of "greenbacks" during 
the civil war, the purchasing power of a paper dollar 
was reduced to less than half, and gradually appreciated 
in value as the expectation of early redemption increased . 
The effect of such issues upon government revenues will 
be treated in its proper connection. As currency, it cer- 
tainly robs each creditor and holder while depreciating, 
and as surely robs each debtor while appreciating. As 
wage earners are universally creditors, according to pre- 
vailing customs, they suffer most in a depreciation of 
money values : i.e., they work for dollars at one value and 
a week or a month later receive them to expend at a less 
value. Speculative debtors, on the other hand, always 
thrive on depreciating currency, paying their debts in 
what costs less exertion. Under appreciating currency, 
the creditors gain, be they bankers or workmen. 

Banking. — The peculiar convenience for saving found 
by experience in the use of each of these methods of 
settlement in exchange leads to a natural commingling 
of all. Coins serve some purposes best, and accounts 
have a limited range; notes of hand are often desirable, 
and paper money, if safe, is universally convenient. 
This natural combination has led to a more systematic 
arrangement for handling various kinds of currency, 
called banking. The most obvious addition to the 
machinery of exchange in the system of banking is 
the possibility of immediate transfer of property right 



138 Rural Wealth and Welfare 

in a bank deposit by check and account, or by a draft in 
account between banks, or by bills of exchange in more 
distant transactions. The bank deposit is made up of 
individual wealth, or titles to wealth, supposed to be 
immediately available for use in exchange. It may con- 
sist of all the kinds of currency described or conceivable. 
Checks are orders upon these individual accounts or 
deposits, and by their means exchanges are made with 
great ease and little risk between individuals in the 
same neighborhood or even in distant cities or distant 
countries. The cost of storing, handling or trans- 
ferring any form of currency is reduced to a minimum. 
So far-reaching is this comparatively modern machine 
of exchange that it is properly assumed to be the means 
of settling 90 per cent of all exchanges, domestic and 
foreign, with almost no use of money in any of its 
numerous forms. Its importance as a machine of com- 
merce entitles banking to a more distinct consideration, 
and chapter XI will be devoted to the subject. 

Deferred settlement. — In certain stages of civilization 
exchanges involve, not simply present wealth, but pros- 
pective accumulation. A farmer may purchase his farm 
upon the assurance of crops and stock to be raised in a 
series of years. In this exchange final settlement is 
deferred by notes payable at definite future dates, the 
promise to pay being secured by a deed in trust, a 
mortgage deed or individual endorsement. If many 
individuals are united, a purchase may be made by 
means of issuing more formal notes called bonds, the 
property of the company being pledged for the payment 
of the bonds when due. Sometimes such purchases are 



Deferred Settlement 139 

made by the issue of stock, establishing the right of the 
seller to a certain undivided share in the wealth con- 
trolled by the company. In this case the time of final 
settlement is indefinitely postponed, to be fixed by 
limits of the charter or by a vote of the stock -holders. 
All these certificates of indebtedness serve to a limited 
extent in exchange of property. So far as they enter 
into commerce, after the first transaction, they are 
simply articles of purchase and sale, having a more or 
less established market value. Since they usually repre- 
sent an accumulating interest or a provisional dividend, 
the market value is constantly fluctuating, and they can 
therefore serve almost no purpose of currency. 

The ease with which such notes, bonds and stock 
can be made the basis of a single purchase in establish- 
ing some enterprise gives to them an indefinite influence 
in trade, sometimes immensely extending the apparent 
purchasing power of a community. The advantages 
and disadvantages of such deferred settlement are so 
varied and important as to make it worth while to treat 
the subject more extensively than is proper in this 
analysis, and such treatment will be found in Chapter 
XII. 



CHAPTER XI 



BANKS AND BANKING 



Origin of banks. — Attention has been called to the 
banks of the country as a most important part of 
the machinery of exchange. It is proper to describe 
more fully the nature of the machine and its operations. 
A clear understanding of the character and process of 
banking on the part of all the people both extends its 
influence and diminishes its dangers. Banking, like 
everything else in civilization, has had a natural growth. 
The different steps in its growth have been devised for 
the sake of meeting the needs of a growing commerce, 
and banking can exist only where commercial transac- 
tions are frequent and constant. 

The word bank, distinctly related to the English 
word bench, is supposed to have been adopted from the 
fact that early Jewish dealers in money sat by a bench 
in the streets of Italian cities. The commercial city of 
Venice is supposed to have been the seat of the first 
organization distinctly named a bank. This was a 
corporation of money lenders who handled their capital 
in the form of coin by exchanging it for notes of 
individuals. This was as early as the twelfth century. 
Since that time in every civilized community there has 
been experiment upon methods for quickening exchanges 

(140) 



Origin of Banks 141 

through such organizations, some of which have been of 
great advantage and some have brought disaster. The 
modern system of banking is the result of all these 
centuries of experience, a history of which cannot be 
given here. 

Bank described. — A brief description of the most 
modern form of banks under state or national restric- 
tions will help to understand how these institutions 
serve the world of commerce. 

In simplest terms, a bank is a company founded for 
the sole purpose of dealing in coin and current certifi- 
cates of credit of every form, the prime object being 
the convenience of people in making exchanges of any 
kind. Sometimes a bank is called upon simply to make 
change, or, as we say, to break a valuable coin or a bill 
of large denomination into smaller pieces. On the 
border land between two countries the banker serves a 
traveler by exchanging the coins of the country he 
leaves for coins of the country he enters. 

Often the bank, equipped with safe protection 
against fire or robbers, receives the wealth of others in 
any form of money for safe keeping, with provision 
for its being paid when it is needed, whenever and 
wherever the owner directs. The same bank may be 
asked to exchange the money in its possession for notes 
of individuals payable on demand or at definite future 
time. It may even issue notes of the firm in place of 
the individual notes received, acquaintance of a com- 
Imunity with the standing of the bank as a dealer in 
money making its notes circulate where individual 
notes would not. In this case the wider credit of the 



142 Rural Wealth and Welfare 

bank is exchanged for the limited credit of individuals. 
In the end a well established bank in close association 
with a system of banks is expected to do any service 
that has to do with either money or credit, so long as 
the credit approximates cash transactions, and has not 
drifted into overdue debts requiring courts and officials 
for collection. 

So important are all these functions of a bank to the 
interests of society that distinct provision is needed in 
the law of the land for establishing the bank and main- 
taining its efficiency. The double system of govern- 
ment in our country known as state and national leads 
to two classes of banks, called state or national accord- 
ing as they are organized under authority of state 
government or under national laws. 

State banks. — The independent laws of any state 
are supposed to provide such restrictions as the people 
desire for the management of banks. Any bank char- 
tered by the state government is subject simply to the 
laws of the state pertaining to banks and is called a 
state bank, whatever the name under which it does 
business. 

The laws of the different states vary indefinitely, but 
the essentials of a banking law quite recently established 
in one of the states may serve to illustrate the modern 
ideals as to safe, legitimate banking. Under this law a 
bank must be a corporation of not less than five persons 
who have subscribed for the entire stock and have paid 
at least 50 per cent of the value of this stock before 
beginning business, with provision for payment of 
10 per cent each month until the whole of the capital 



State Banks 143 

stock is paid for in cash. Each stock- holder is individ- 
ually liable to an amount equal to the value of his stock 
for any debts of the bank in excess of its original 
stock. Having 1 settled upon a name distinct from all 
others, its application is made to a bank commissioner 
for a charter to do business in banking according to the 
laws of the state. Under the charter issued by the com- 
missioner, the bank is required to be managed by a 
board of directors, from five to thirteen in number, 
which board elects the needed officers and appoints the 
necessary clerks. It cannot increase its capital except 
by fully paid stock, and can do no other kind of busi- 
ness, like buying and selling of goods and lands, or 
managing factories and railroads. It is authorized to 
receive deposits and make loans at interest not above 
legal rate, provided it keeps on hand available funds, 
including bank balances, amounting to 20 per cent of its 
total deposits, and never loans to one individual or firm 
more than 15 per cent of the paid up capital of the 
bank. A penalty of fine and imprisonment follows con- 
viction of any officer for receiving deposits after general 
insolvency is known. 

Each bank is required to report to the commis- 
sioner at least quarterly, and whenever called upon 
to publish its report; while failure to comply with 
requirements of the commissioner in report or other- 
wise brings immediate forfeiture of the charter. The 
commissioner or his deputy must visit each bank at 
least once a year and whenever occasion may require. 
If, upon examination, a bank is found insolvent the 
commissioner himself takes charge of the business for 



144 Rural Wealth and Welfare 

final settlement of its affairs. These important restric- 
tions and careful inspection are thought necessary tG 
secure the public interests in banking. The stater- 
through its bank commissioner gives guaranty to the? 
public of legitimate and safe banking. The value of 
that guaranty, of course, depends upon the honesty, 
experience and executive ability of the bank commis- 
sioner, whose term of office and compensation should i 
make him as independent as possible of any weakening 
influence. Under present arrangements no state banks> 
issue their notes as currency because of a national tax 
of 10 per cent, which prevents a possible profit from itss 
issue. Present state laws, therefore, make no provision 
for that function, unless by statutes existing before the 
organization of national banks. The states still have 
the constitutional right, apparently, to charter banks of I 
issue, but the advantages of uniformity throughout the 
nation are so evident as to make such action very 
improbable. 

National banks. — The so-called national banks organ- 
ized under authority of United States government have 
been in existence since 1863, and have proved, so far as 
currency is concerned, such an improvement upon any-- 
thing preceding in the way of bank issues, that few have 
advocated any return to former methods. The system as ; 
now existing places the authority of the United States in j 
an officer called the comptroller of the currency. The 
law requires an association of five or more persons with] 
a definite name and location, -having not less thani 
$100,000 capital ($50,000 in small towns) all paid with- 
in six months of beginning business. Share-holders are 



National Banks 145 

individually responsible for debts of the bank, aside from 
their stock, to an amount equal to their stock. 

In banks having over $5,000,000 capital a surplus of 
20 per cent may take the place of this individual respon- 
sibility . Not less than one-fourth of the capital stock, 
usually one- third, is deposited in the United States 
Treasury in the form of registered bonds of the United 
States, to be held exclusively for security of circulating 
notes. These notes are issued to the bank by the comp- 
troller to the amount of not more than 90 per cent of the 
narket value of the bonds deposited. These notes, 
printed by the government, signed, registered and sealed 
n the United States Treasury, in denominations from 
ive dollars to one thousand dollars, become money when 
signed by the officers of the bank whose name they bear. 
The cost of these notes, together with the cost of restor- 
ng when worn out, as well as the expenses of the cont- 
roller's office, are met by a tax of 1 per cent per annum, 
)aid semi-annually, upon the average amount of notes 
n circulation during the previous six months. Such 
lotes are not a legal tender, but are received at par for 
ill dues to the United States except duties on imports, 
md for all demands against the United States except 
nterest on the public debt and in redemption of cur- 
■ency. Any other issue of notes is prohibited, and worn 
ut notes are cancelled and burned in the Treasury of 
he United States, being replaced by new. 

The banks in sixteen principal cities are required to 
told a reserve equal to 25 per cent of their circulating 
Lotes in lawful money of the United States, namely coin 
>r treasury notes, and all other banks must have a re- 



146 Rural Wealth and Welfare 

serve equal to 15 per cent of their circulating notes in 
the same form. This reserve is held for the redemption 
of the notes, provision being made for such redemption 
at the Sub-treasury of the United States in New York 
city, bank balances and clearing house certificates in the 
larger cities being counted as part of the reserve. The 
object of this is to secure ready redemption of any note* 
in all parts of the nation. 

The comptroller's office includes expert examiners,; 
and to it each bank must report at least five times a] 
year, with other special reports as called for. Each banks 
is subject to examination at the pleasure of the comp-i 
troller, and in case of failure to redeem bills or comply 
with the law, the comptroller has power to take posses- 
sion of the bank and close its business. The usual 
banking business of any national bank proceeds accords 
ing to the laws of the state in which it exists, the legal 
rate of interest of the state being compulsory. 

Advantages and disadvantages of national bank cur-' 
rency . — The advantage of such a uniform system oi> 
bank notes is evident. The bills are secure beyond the 
possibility of doubt as to their final redemption, and 
therefore circulate freely without reference to the fail- 
ure of the bank issuing them. In case of failure, all the* 
banks form a ready machinery for collecting the bills; 
for final redemption at the United States treasury. 
The frequent reports and expert inspection give as sat-; 
isfactory means of maintaining safe management as can 
be secured by law. The possibility of connivance be- 
tween examiners and bank officers is reduced to a; 
minimum. 



National Bank Notes 147 

At the same time, there are disadvantages from sev- 
eral sources. First, United States bonds do not form a 
permanent basis. Second, the market value of these 
bonds and the low rate of interest make the use of 
capital in the shape of circulating notes less profitable 
than other capital in the bank. This is especially true 
in the newer communities where interest is high, and 
banks so located are likely to surrender their circulating 
notes at times when money loaning is most profitable, 
and thus cause a fluctuating volume of currency in the 
country. Third, the national banks are easily made ob- 
jects of suspicion as to matters of legislation with 
reference to money. 

Government oomks. — Similar institutions under di- 
rect management of government officers have often 
been thought of as bringing the banking machinery 
within the direct judgment of the people, and so best 
meeting the wants of the community as a whole. The 
advantages of unity and publicity in such a system 
seem evident, and yet in actual practice the safeguards 
against misuse of power have proved on trial less satis- 
factory in such methods than in several others. The 
history of debased coinage already referred to shows 
that men in power may easily disregard the interests of 
the people, and under popular government both officers 
and legal restraints are subject to changes in the 
interest of localities and parties. It is possible that a 
stable body of experts might manage such an institu- 
tion under laws as stable as the Constitution with suc- 
cess. But the restraints of law are most effective upon 
institutions outside official circles, 



148 Rural Wealth and Welfare 

A government bank is subject to extreme pressure 
from popular demand under any financial distress to 
issue currency for general improvements in public 
buildings, parks, etc., which can bring no return and 
afford no means of redemption. Even the demand of 
unfortunate debtors for extended loans may push the 
bank into excessive issues, and finally lead to the scal- 
ing of debts and currency together in an effort to 
escape the results of over -issue. 

Bank business. — Whatever the organization of a 
bank, its business must be essentially the same. It 
receives deposits from its customers for safe keeping and 
for convenience in use by means of checks. A check 
is simply an order to pay, and, if the receiver is a cus- 
tomer of the bank, amounts to merely a transfer of 
deposits from one owner to another on the books of the 
bank. A thousand dollars safely kept in the bank vault 
may thus change owners a hundred times by means of 
checks properly recorded. In large transactions the 
check, because of its economy, takes place of any other 
form of currency. The bank must also deal in drafts, 
by which exchanges can be made in different cities, and 
in bills of exchange, distinguished from ordinary drafts 
by special reference to foreign trade. It may also hold, 
as a part of its available machinery, clearing house cer- 
tificates, which are statements of balances due in the 
daily settlement between the banks belonging to a 
clearing house association. 

All these form a part of the machinery of every -day 
exchange, and together with a complete system of book- 
keeping make the utmost facility in the use of money. 



Bank Business 149 

They also greatly economize in the nse of money by sav- 
ing* cost of counting and of transfer, and by securing 
against losses. If the system offered no more advan- 
tages than this safe and ready use of good money, the 
banks would be practically indispensable. But they 
have a still greater use in a safe extension of credit. 
The perfection of system in banking makes it possible 
for one who habitually fulfils his promises to purchase 
anywhere in the world on the shortest notice with the 
simple guaranty of credit in the bank where he does 
business. A traveler wishing to have funds in safe- 
keeping, and yet available on a journey around the 
world, may obtain through a bank familiar with his 
business standing a letter of credit, upon which he can 
draw, wherever he may be, against the deposit in his 
favor, and his draft will be paid, through a series of 
banks, at the bank near his business connections. Thus 
the credit of the world is bound together by the banking 
system grown up to meet the necessities of trade. 

The clearing house. — All forms of credit referred to 
above, where dealers are customers of a single bank, are 
easily brought together upon the books of that bank, 
and will practically cancel each other. The customers 
of many banks in large cities may have their checks and 
drafts brought into a single system of book-keeping 
through a clearing house, which is simply a bank of 
banks. At a certain hour each day, in the larger cities 
twice a day, each bank of the city brings to the clearing 
house all checks and drafts against any other banks. 
These are quickly sorted, charged to the several banks 
against which they are drawn, and credited to the banks 



150 . Rural Wealth and Welfare 

from which they are brought. The balance of debit and 
credit is settled then and there, either by transfer of 
cash, or by issue of a clearing house certificate that a 
bank has a balance in its favor, and so only a small 
amount of cash is used in settling all transactions of an 
immense business. The clearings of a single day reach 
hundreds of millions of dollars, and form an index of 
the business prosperity of the country. 

The system saves the risk and cost of transferring 
back and forth immense amounts of coin and currency, 
and brings the business men of the country into ready 
contact with each other. It is an essential part of the 
means of settlement between different cities and dif- 
ferent countries. A debt in any part of the world can 
be paid through a draft on London, which by means of 
the clearing house and its associated banks can be pur- 
chased anywhere and paid without delay. Since the 
purchasing power of any part of the world is chiefly in 
what it has to sell, the constant motion of checks and 
drafts in opposite directions will balance each other. If 
there were no long time credits, the purchases of any 
city would essentialy equal its sales ; and so with perfect 
clearance all trade would be quickly adjusted with but 
little use of money except for retail business. 

Other clearing systems. — So evident are the advan- 
tages of clearing houses in banking that the system ex- 
tends to many other interests. Railroad corporations 
balance accounts against each other by exchange of 
tickets issued by the different roads. Large combina- 
tions of dealers in implements or other goods find a 
similar service available where they can work together 



Clearance Systems 151 

with confidence. Express companies sharing in a com- 
mon service divide the final proceeds npon the same 
principle. So evident is the advantage that the growth 
has been rapid during recent years, and seems likely to 
extend still further. 

Some effort has been made to establish farmers 7 ex- 
changes upon a similar plan, but as yet with little suc- 
cess. The obstacles are chiefly in the want of business 
confidence in business habits among the farmers them- 
selves. Since the system is strictly a credit system, 
exact promptness in meeting engagements and constant 
dealing in the same channels are absolutely necessary. 
Most farmers, having comparatively few transactions 
from day to day, are loth to attach themselves as con- 
stant customers in any association. With larger expe- 
rience and more neighborly contact they are finding it 
possible to work in association for various purposes, and 
will doubtless enlarge their means of business credit as 
their progress in mutual understanding increases. 

Government inspection. — The principal support of 
universal credit through banking is the assurance that 
uniform methods, honest in principle and accurate in ex- 
ecution, are followed. To secure these 'results a system 
of government inspection and guaranty seems absolutely 
necessary. If the public faith is to be maintained, the 
ground of that faith must be publicly established. The 
more complete the examination by trusted officials and 
the more frequent the publication of official reports, the 
better the public credit. It seems possible that even in- 
dividual trustworthiness may become a matter of gov- 
ernment record as it is now of private consideration in 



152 Rural Wealth and Welfare 

all business circles. One chief guaranty of credit 
through the banks is the strict inquiry made by the 
banks themselves into the business standing of their cus- 
tomers. If the record were perfect, the chief weakness 
of the credit system would be largely removed. 

The balance of trade. — -The bulk of trade between 
countries, that is of dealers in different countries, is 
settled in the usual routine of banking as has been in- 
dicated ; but since under present systems the standards 
of value are given in different terms in different coun- 
tries, somewhat more of friction remains in 'such trade. 
A greater attention is given to the fact of final settle- 
ment in coin or bullion. The price of exchange from a 
country whose dealers owe more than is due them, under 
the law of supply and demand, soon arises to an amount 
sufficient to cover the cost of transporting gold or silver. 
When these metals are used in payment by transporta- 
tion from one country to another they are said to indicate 
the balance of trade; that is, they show that more of 
other property comes into the country than goes out. 
This balance of trade is supposed to show the relative 
prosperity of a nation, and is said to be against it when 
the nation buys more than it sells. 

It is usually sought in the difference between the value 
of coin or bullion exported and of that imported. In 
two sets of circumstances a large correction is necessary 
to show the actual condition of trade. One is where a 
nation is buying on long credit, as in case of great enter- 
prises like railroads or factories, constructed by sale of 
bonds in foreign countries or by sale of any other securi- 
ties, government or individual, in a foreign land. The 



The Balance of Trade 153 

other is where a country like our own is a large producer 
of gold and silver by mining. In this case the products 
of the mines are as proper an article of export as the 
products of the farms or of the factories, and should be 
estimated as a part of the natural exports. For these 
reasons the balance of trade must be carefully scrutinized 
before being accepted as proof of a nation's progress in 
poverty or wealth. 

Bank loans.— So far, in dealing with the subject of 
banking, no mention has been made of the function of 
extending individual credit by time loans. One of the 
original purposes of banking was to make a convenient 
office for the meeting of borrowers and lenders. The 
banks are still the go-betweens of those who have money 
to lend and those who have to borrow. In fact, every 
banking association is assumed to be a corporation of 
money lenders. Under ordinary circumstances this cor- 
poration is able to loan to individuals whose credit is 
good all of its capital not otherwise employed in the 
machinery of the bank, a considerable portion of deposits 
from its customers, and to a certain extent its own credit 
in the commercial world. In the case of a national bank 
a portion of capital is loaned to the government in the 
purchase of bonds, which are the basis of its circulating 
notes. The circulating notes, from 60 per cent to 90 per 
cent of the value of the bonds, are an extension of credit; 
that is, the capital already loaned on time to the govern- 
ment is partially loaned again to individuals. Again, 
the deposits of the customers, to be drawn as needed, in 
ordinary circumstances are not needed the same day. 
The bank soon learns by experience what portion it is 



154 Rural Wealth and Welfare 

safe to lend from day to day to individuals who are sure 
to make payments when promised. Double signatures, 
or endorsements, double the surety of prompt payment. 

Thus the banks are enabled to provide safe keeping 
for money without charge, and even to pay a low rate 
of interest upon considerable deposits when times are 
good. In this way legitimate borrowers and legitimate 
lenders find a close connection in the bank. A legiti- 
mate lender is one who has property not needed at 
present for his own use. A legitimate borrower is one 
who can use capital to advantage in production. Any 
producer may at one part of a j^ear be a lender and 
afterward a borrower to advantage of everybody. If 
the banks are thoroughly satisfactory the proceeds of 
the fall crops may serve the busy manufacturers as 
circulating capital during the winter. Again, the pro- 
ceeds of the spring sales of goods and machinery may 
tide the farmers over the season of growth. 

In this way labor of every kind is sustained by labor 
of every other kind. In all these ways the banking 
power of a country is extended to several times the coin 
money in circulation, and that with perfect safety. But 
it is possible for banks to be tempted through the very 
perfection of their own credit. The note of an 
individual has no established market value. A deposit 
in the bank is valued as cash. It is possible to secure 
the credit of having a bank deposit by discounting an 
individual note. If that note is a time note the bank 
has increased its immediate liabilities by the amount of 
a nominal deposit, with only a promise to pay in the 
future to rest upon. To lend to an individual is prac- 



Bank Loans 155 

tieally to enter into partnership with his fortune. The 
fortunes of the group of individuals representing the 
bank is less doubtful than that of any one person. 
The borrower in this instance pays in the discount of 
his note the difference in risk between his fortune and 
that of the combination. Such deposits purchased upon 
credit must be distinguished from deposits of cash, lest 
the bank should nominally increase its power to lend 
while in fact it has already lent up to its ability. Some- 
times such nominal deposits are maintained by persons 
deeply in debt for the sake of paying a larger rate of 
interest than is allowed by law. 

Safety of banking. — In times of business prosperity 
a bank with usual business caution as to customers, is 
safe for all concerned. And yet, in the very nature of 
extended credit, it has promised to pay on any particular 
day, if demanded, far more than it has cash in hand. 
Its liabilities embrace the whole of its deposits except a 
small portion made for a definite time, and all its issues 
of currency subject to redemption. To meet these 
engagements its immediate resources are whatever cur- 
rency in any form of coin or bills it may have at hand. 
This amount, since its profits are made from lending, 
not from holding, must be small in proportion to its 
liabilities. The bulk of its means of payment is in 
notes not yet due, and to be collected when due. Of 
other property it is likely to have bonds of municipal- 
ities or of great corporations, and these are supposed to 
be a more available form of resources than individual 
notes, because they usually have a definite market value 
and can be sold or used as security for loans in any 



156 Rural Wealth and Welfare 

money market. If real estate forms a part of the 
capital, it can never be made available for immediate 
use. Hence any bank dealing in mortgages on real 
estate invests its funds "where they cannot be had wheni 
wanted. All banking schemes based upon security in 
land have necessarily failed, because land has no cur- 
rent use in trade. 

Under the pressure of panic, from whatever source, . 
each depositor is sure to demand every cent due himi 
from the bank, and just as certainly the bank's owni 
resources are insufficient to meet those dues without the ' 
sale of bonds and notes in other markets. For these 
reasons in any great period of distrust the banks are 
obliged to suspend payments. Since all the banks of 
the community are in similar circumstances they cannot 
help each other, and time must be given for the collec- 
tion of loans, according to agreement, that the gradual 
accumulation of ready cash may return to the vault, 
aud so to the depositors, all that has been loaned. 
Because of this necessary instability bankers watch most 
carefully the tendencies of the money market, and 
necessarily reduce their loans for safety when any 
anxious pressure begins. For the same reason legitimate 
banking is limited to short time loans — on demand, 
thirty, sixty, ninety days — the shorter being the safer. 
Laws sometimes prohibit a bank from dealing in any 
other business, where a stock of goods must tie up 
funds, or from speculation in real estate, which confines 
capital more certainly. 

In most banks the amount to be loaned to a single 
individual or firm is limited to a small portion, one- 



Safety of Banks 157 

tenth to one -fifth, of the total capital. The principal 
canses of failure in banking are defalcation of officers, 
misuse of funds in speculative enterprises, dealing in 
speculative securities or on boards of trade, careless 
loaning to poor paymasters, investment in long time 
securities not readily marketable, or sacrifice in hurried 
sale of stocks and bonds under the pressure of panic. 

The better the customers of a bank understand its 
condition and management, the less is its danger, for 
the basis of banking, as of the credit of the world, is 
the public confidence. Farmers who acquaint them- 
selves with the workings of neighboring banks by 
making use of their aid in business benefit both them- 
selves and their neighbors. The progress of the world 
demands of every farmer a closer contact with business 
and, therefore, a greater familiarity with business 
methods. Even the burden of debts will be lessened 
when farmers understand and appreciate the advantage 
of systematic credit. The dangers from over expansion 
of credit are lessened when all the people clearly under- 
stand the essential conditions for maintaining credit. 
The final perfection of a banking system depends upon 
the interest of the whole people, with a fair knowledge 
of the growth already made. 



CHAPTER XII 
DEFERRED SETTLEMENT AND CREDIT EXPANSION 

The general bearing of settlement in trade, deferred 
by promises to pay in the distant future, has been sev- 
eral times referred to in preceding chapters; but its 
bearing upon the general welfare is so marked in many 
ways as to deserve more particular treatment. The 
special form by which one man becomes a purchaser on 
the strength of future abilities may have little impor- 
tance in the total result, but some peculiarities of the 
different forms are worthy of mention. 

A standing account without definite period of settle- 
ment easily becomes a temptation to waste, as well as a 
source of worry, when the account is extended. A 
friend remarks, "You never seem so well off as when 
you don't expect to pay for what you buy, although the 
reason may be that you can't pay for it." The fact 
that the day of settlement may be indefinitely post- 
poned makes the temptation to overestimate the chances 
of future ability. An account almost certainly insures 
the purchase of ordinary supplies without asking the 
price, and only frequent and complete settlement makes 
safe for ordinary people the expenditure of income 
through store accounts. 

Promissory notes due at a definite time have less 

(158) 



Deferred Payments 159 

effect upon the imagination; yet payment a year hence 
seems always easier than payment now. Only repeated 
bitter experiences teach one to say, as I once heard an 
old gentleman, when offered a horse to replace his dead 
one without limit as to the time of payment, "That 
sounds very well, my friend, but it is a mighty hard 
way at the latter end." Every farmer familiar with 
country auctions, with a year's credit upon purchases, 
sees the effect of such postponements in magnifying the 
value of articles purchased. 

A note secured by chattel mortgage in the nature of 
the security is less extended and has the distinct hard- 
ship of future payment presented in the possible loss of 
the chattel offered as security. The chattel mortgage, 
therefore, becomes a favorite method for short time 
delays in payment, not only because the security is 
good, but because the full attention of the maker is 
given to the necessity of payment. 

A most familiar form of deferred payment for farm 
property is the mortgage note, secured by a deed en- 
titling the holder to take possession of the farm, or real 
estate of any kind, upon failure of the maker of the 
note to meet its conditions. This is esteemed the best 
possible security for payments long deferred, because 
the ordinary values of real estate in a growing country 
like ours increase rather than diminish. Except in 
cases of overvaluation from speculative investment, or 
in the settlement of a new country under misconception 
of its conditions, the security remains ample. And 
even then the lender has no greater risk than the bor- 
rower. Since final settlement by foreclosure of mort- 



160 Rural Wealth and Welfare 

gage involves the law's delay, increased by the natural 
sentiment growing up about a home which has been 
occupied for years, such mortgage notes are only to a 
limited extent available in general commerce. In large 
measure they are likely to stand between the original pur- 
chaser and seller. The exception to this is found in in- 
vestment of large trust funds, as with insurance companies 
and endowments of colleges and other benevolent insti- 
tutions. In these cases a permanent investment, with 
stated income, is desirable, and mortgage notes with five 
to ten years' credit give better rates of income than 
long time bonds of great corporations or governments. 
The ease with which purchase is made by a mortgage 
tempts many a young man to promise more than he can 
fulfil. The weight of the farm mortgage is felt through- 
out the country, doubling the disaster of every deficient 
crop. Variations from the mortgage in deeds of trust 
and instalment contracts have essentially the same 
relation to credit, involve essentially the same burdens, 
and differ only in the legal forms for taking possession 
of the real estate in default of payment. 

Where a company or a community defers payment 
for its purchases, it is said to issue bonds, which are 
simply formal notes, usually with attached notes, or 
coupons, for interest at stated times, issued by qualified 
officers under specific legislation. These are so easily 
understood and tested for their quality as to become a 
part of the general credit of the country. They gain a 
well understood market value, and pass from hand to 
hand with greatest readiness. This fact adds to the 
ease with which they may be issued, while the extended 



Bond Issues 161 

ime, from ten to thirty years, increases both the con- 
venience of possession and the readiness to issne. The 
)eople of a city do not hesitate to supply themselves 
vith magnificent waterworks at the expense of the 
)eople a generation later. Thus municipal indebted- 
less is easy to contract, and the hard lesson of paying 
*or dead horses is seldom effectually learned. More 
nsidious still is the temptation to issue the bonds of a 
county for the building of a railroad, whose prospective 
)enefit in adding to the value of lands is indefinitely 
nagnified. A community of farmers already burdened 
)y mortgages can be tempted into additional burdens in 
county bonds from expectation that a new railroad will 
iouble the value of their farms. The facility with 
vhich states and nations negotiate bonds is so well 
mderstood that it scarcely needs mention. Yet the 
>urdens of taxation so grievously felt are often self- 
nfiicted by the people who favor unbounded indebted- 
jess. It is rarely the case that a well-to-do school dis- 
rict is not better off when it meets the cost of its 
choolhouse by immediate taxes rather than to postpone 
Dayment by bonds. 

The organization of a stock company involves a 
peculiar system of deferred payments, in that every 
lolder of stock becomes in a sense both debtor and 
creditor. He is debtor to all his associate sharehold- 
ers, and is also their creditor to the extent of his 
mare. Stock certificates, like bonds, may pass from 
aand to hand with ease, and foster the innate spirit 
)f speculation among a commercial people. The organ- 
ization of a stock company, especially of a great trust, 

K 



162 Rural Wealth and Welfare 

is made relatively easy from this fact, and in this way* 
the general credit of a people is indefinitely extended. 
A prosperous corporation is likely to distribute the re 
suits of its prosperity by increased issues of stock, and 
the readiness with which the public accepts such issues 
makes natural, though vicious, the so-called watering ofi 
stock, familiar to all. The immediate object of watered 1 
stock in fairly managed companies is the immediate 
distribution among shareholders of any increased value 
without increased cost. As the farms along a line of 1 
railway may have doubled their value with no expendi- 
ture in improvements, so the railroad itself may have 
doubled its value in the possibility of earnings through 
the rapid development of settlements along the line. In 
ordinary ways this increased value will be shown in the 
market price of the stock, but an issue of more stock to 
the present holders of stock certificates will keep dowm 1 
the price of individual shares and yet give the benefit 
of the increased value to shareholders. 

The stock exchange. — The last mentioned forms of 
indebtedness so easily become matters of everyday pur- 
chase and sale as to lead to the business of stock broker- 
age, found everywhere in greater or less extent. Im, 
large cities the brokers naturally unite for convenience 
of business in the so-called stock exchange, in which the 
market price of all current forms of indebtedness or 
deferred payments is fixed from day to day, or from 
hour to hour, by the higgling of the market, just as the 
price of produce is fixed in the produce exchange. Nat- 
urally, as in the case of produce, a fictitious business, 
purely speculative, grows up around the legitimate dealing 



The Stock Exchange 163 

in stocks and bonds. Other forms of deferred payments 
enter less into the business of the brokers, because the 
market value of any particular mortgage or individual 
note cannot be easily determined outside the immediate 
neighborhood where it is made. The chief way in which 
these enter the general brokers' market is through the 
stock or bonds of large brokers' companies, sometimes 
called guaranty loan companies. In this way the uni- 
versal extension of credit through deferred payments 
finally has its effect upon the general confidence. The 
broker's business grows legitimately out of the need of 
ready transfer of claims, for the sake of larger use of 
the floating capital of the country, and readiness of 
investment in more fixed forms. It adds, however, to 
the dangers of extended credit by making more easy the 
(gratification of present wants through expectation of 
^future ability. The broker makes his gain, without 
reference to the final settlement, by taking a commission 
upon the loan. His interest leads to an overestimate of 
the borrower's ability, and cases are not infrequent 
where appraisers of real estate have been hired by bro- 
kers to misrepresent the value of property, for the sake 
of securing improper loans. 

Every period of expanding credit in speculative move- 
ments has furnished proofs of this tendency. A stand- 
ing example is furnished in mining stocks, in which the 
temptation to misrepresent prospects by " salting " and 
false assays is proverbial. Almost as notorious are the 
misrepresentations associated with bonds of newly es- 
tablished cities or other municipalities. Not all such 
misrepresentation is intended fraud, but the immediate 



164 Rural Wealth and Welfare 

interest of the broker clouds his judgment as to condi- 
tions of final settlement. With little to lose and every- 
thing to gain in the immediate transaction, his judgment: 
is necessarily biased. The merely speculative buying ; 
and selling of stocks by margins has little to do with the j 
general character of indebtedness, except to increase 
somewhat the risks of legitimate brokerage. The "bulls i 
and bears" on exchange make their gains by fluctua- 
tions in market values, and, like all gamblers, delight 
in producing false impressions upon their opponents in 
the game. This fact adds to the uncertainty of all 
standing credit, and so increases the natural rate of 
interest. This effect upon interest will be noticed in 
considering the nature of interest and conditions affect- 
ing it. 

^Borrowed money." — In all the forms of deferred 
payment, except standing accounts, it is customary to 
represent the amount of the debt as "borrowed money," 
no matter how the transaction occurs. When a farmer 
buys his farm with a promise to pay five years hence, 
his note is said to represent so much "borrowed money," 
while in fact he has simply borrowed the farm. The 
reason is, that the farm is represented by its value in 
dollars, and the promise is to return that value in dollars 
at the end of five years. 

The same is true, in fact, of all purchases on credit. 
Even when the purchase is made by means of a note at 
the bank, the actual transfer of property is from the 
owner of the farm to its prospective owner, the bank 
simply acting as agent, and interposing its credit or 
capital only to promote the exchange. In many instances 



Borrowed Money 165 

do money in any form is used, and where it is employed 
at some stage of the transaction, it is used, as in any 
other exchange, simply as a machine of transfer. Even 
the final settlement is likely to be made through the or- 
dinary channels of trade, without the intervention of 
money in any of its forms. The deferred payment takes 
its place when the time of payment comes in the ordi- 
aary everyday transactions of the universal credit sys- 
;em, illustrated in banking. Even if the farm is paid 
.or by instalments, those instalments are simply ordi- 
nary transactions in trade, the farmer transferring the 
heck which he receives from the sale of his steers or his 
ivheat to the former owner of the farm. The money in- 
volved is simply money of account, referring to a well 
inderstood standard of value. The importance of this 
standard in reference to deferred payments has already 
3een referred to. It cannot be overestimated. But 
my estimate of the currency needed, or to be needed for 
jhe transaction of business, founded upon the amount of 
ief erred payments, is wholly fallacious. 

It is equally wrong to suppose that the bankers are 
he principal money-lenders. The real lenders are those 
svho have sold their produce, the use of their tools or 
heir time, at a price to be paid next week, next month 
i)r next year. Every man who has wages due him is as 
:ruly a money-lender, to the extent of the wages due, as 
iny banker who accepts a promise to pay in the future 
.or service or value given in the present. Even where 
he borrowed articles have been consumed or wasted, the 
promise to pay is simply a promise to return so much of 
value as the articles received were estimated to be 



166 Rural Wealth and Welfare 

worth. This may be easily seen in thinking of a run- 
ning account at the store for the ordinary supplies of! 
the family. It may amount to five hundred dollars, ifi 
one's credit is sufficient, and seem only the actual 
articles used, and yet to be paid for; but if settled by ag 
note fixing a future definite time of payment, the debt 
at once becomes in thought borrowed money, though no 
change whatever has been made in the actual facts. If 
the same purchases had been made by means of credit at! 
the bank, gained by discounting a personal note, the 
same articles exactly would have been borrowed, the 
bank instead of the merchant being the lender. In all 
probability the bank has been the means in the first case 
of enabling the merchant to meet these current wants on 
credit, for he himself has gained the credit of the bank 
by discounting his own note. In either case the bank 
has been the means of serving both the borrower and^ 
the lender. It is simply a machine for accommodat- 
ing both. 

Legal tender. — All forms of deferred payments imply 
the possible intervention in final settlement of the force 
of government. While the great mass of promises to 
pay are met without an appeal to laws or courts, the 
whole is put in such form by customs of society as to 
involve the possibility of such arbitration. Govern- 
ment takes no note of debts which cannot be proved in 
court, and the forms of legal proof are well settled. All 
the formalities of credit in systems of book-keeping, 
forms of notes and bonds, and wording of stock cer- 
tificates imply the possibility of final adjustment in a 
court of equity. For this reason, governments estab- 



Legal Tender 167 

lish some form of currency as the representative of 
value, which must be accepted by the creditor in com- 
plete satisfaction of a debt. This is naturally what cus- 
tom has established as the standard of value, but any- 
thing else may be substituted if the government so 
decides. Thus, Massachusetts once made bullets legal 
tender at a certain price, up to a certain number. Our 
government now makes copper cents and nickels legal 
tender to the value of twenty-five cents. 

The current notes of the government are usually 
legal tender, unless otherwise stipulated, whatever their 
current value, This means simply that the government 
through its courts secures the collection of bona fide 
debts, in terms of value defined by law or by contract. 
The assurance of final settlement, given in this way by 
the government, is one principal element in extending 
credit on time. Without such machinery credit would 
be confined to intimate acquaintances and very limited 
time. 

Expanding credit. — All the machinery of credit 
tends to bring the floating capital of a country within 
the reach of great enterprises. If a body of men have 
faith in some great undertaking, like a continental rail- 
road or a Panama canal, their faith in the enterprise is 
easily made a basis for the faith of others. Even the 
small accumulations, the savings of day laborers, may 

be turned to account in such great enterprises if the 

i 

popular expectation of success is thoroughly aroused. 
The greater the undertaking, the greater is the general 
faith under skilful leadership. 

The same principle applies to undertakings of less 



168 Rural Wealth and Welfare 

national character, like immense factories or combina- 
tions in a trust. The stock of snch enterprises is often 
widely distributed, and when profits are fairly begun, 
even upon a small scale, the chances of gain on the 
value of the stock are made more prominent than the 
actual profits of the enterprise. It is not uncommon to 
find enterprises starting with the expectation that a 
large portion of this stock will be paid for out of the 
profits of the business and the profits on a portion of 
the stock to be sold. This is especially true when busi- 
ness is reviving after a period of depression. It is one 
of the first symptoms of the return of a speculative 
spirit. With the rise of such enterprises there is 
almost sure to be an advance in prices of real estate, 
though it follows later. 

The starting of a railroad line involves the purchase 
of station sites, and almost surely the laying out of vil- 
lages at intervals along the line. The promoters of the 
railroad are likely to be promoters of town sites as well. 
And this increased demand for farms and lots brings a 
larger faith in the future of these locations. Everyone 
who can save a little from his income hopes to increase 
that little indefinitely by investment in the chances of 
increased value of a lot or a home. Under such cir- 
cumstances the machinery of credit moves easily, and 
one does not hesitate to extend his credit to the utmost 
for the purchase of what is increasing in value each 
day. The result is a temptation to larger expendi- 
tures. 

People who are counting their future gains are sure 
to have larger wants, and their seeming prosperity in 



Expanding Credit 169 

accumulation of value gives them a larger credit among 
dealers. The next step is an enlargement of sales of 
current supplies of all sorts and an increasing manu- 
facture of such supplies to meet the increasing wants 
'and naturally enhancing price. Soon the staple prod- 
ucts of farms and factories and mines become them- 
selves objects of speculative purchase. Men buy simply 
to hold for the increase in price. This speculation 
itself is a temporary cause of success, and goes on until 
some accident somewhere reveals the exaggerated pro- 
portions of expectation. Sometimes this speculative 
spirit continues for a series of years, in which case it 
pervades every circle of producers and consumers. 
Sometimes it is temporary and local, being produced by 
some special undertaking and destroyed by a special 
failure. Sometimes the death of an enterprising man 
destroys the "boom 77 he has created. When speculation 
is rife over a large territory, everybody is employed to 
his utmost ability, and the times are said to be good. 
All property of every kind is counted at its highest 
price in the mind of the owner, and all credits are 
easily extended from month to month, or from year to 
year, because of the universal faith. There seems to 
the casual observer no reason for doubt, and the most 
conservative judges overestimate the ability of the 
people. 

Financial crisis. — At such a time as that described, 
when credits of every kind are interlocked and expecta- 
tions are high, the so-called floating capital of the coun- 
try, under indefinite promises to pay, is gradually being 
actually locked up in huge plants of machinery in great 



170 Rural Wealth and Welfare 

railroad routes, in vacant city lots, and uncultivated 
farms held for future sale, or in warehouses and ele- 
vators full of the products of industry, — especially such 
products as do not immediately deteriorate in quality, 
such as grains, cloths, raw materials of every kind and 
machinery of general use. This is apparently the 
property of the holders, but against it are the claims of 
all those who have contributed by loans on time, by 
credit for sales, by labor unpaid for and by provisions 
on account. One can easily see that with all these 
people bound together by credit a single failure may be 
far-reaching in its effects. The inability of a single 
man to meet his promises, if those promises are widely 
enough distributed, may bring a panic among his credi- 
tors, their creditors, and so on down to even the solid 
men, supposed to hold the accumulation of years un- 
touched by speculation. For every channel of trade is 
full of credit, which now everybody loses. 

In 1873 the promoter of the Northern Pacific rail- 
road had borrowed everywhere, even the small savings 
of widows and workmen, through his intimate connec- 
tion with banking. All this accumulation of savings 
had been expended for labor upon what was only a huge 
embankment, making no possible returns to any owner. 
The only possible means of continuing the work was 
continued borrowing, or the sale of additional stock. 
The revenue promised upon the means already used 
could be given only by larger borrowing. On a certain 
day the amount to be borrowed was less than the 
amount to be paid, and the failure of Jay Cooke to 
meet his expectations and promises was known. Within 



Financial Crisis 171 

six hours every village in the land felt the disaster. The 
financial crisis was seen and realized. Bargains par- 
tially completed were stopped in the midst. Materials 
about to be shipped were held at the station. Deposits 
at the bank were needed immediately, notes due at the 
bank could not be extended, collectors of accounts 
appeared at every corner, thousands of workmen directly 
and indirectly employed on the great railroad building 
were out of employment and out of wages due, the 
banks were unable to furnish even paper currency to 
their depositors, and the whole world felt absolute loss 
of confidence in any undertaking or any expectation. 

I select this particular panic because its beginning 
was so comparatively simple, its progress so evident 
and its results so well defined. Any other failure of 
speculative purpose might have been equally disastrous. 
It could hardly have been so rapid, because it could not 
have been so directly distributed among the masses of 
the people. Yet the machinery of credit is such that 
any considerable failure in enterprise or speculation is 
felt everywhere. The banks are at once called upon for 
larger loans and for deposits together, an impossibility 
in the nature of the case. All exchangeable forms of 
credit are immediately offered in market at constantly 
decreasing prices. Current credit of every kind is 
checked, and exchange is limited to the barest necessi- 
ties. All productive energies are practically stopped, 
except such as are out of the line of daily exchanges. 
Very soon all domestic expenses are reduced to the 
lowest notch, domestic help is discharged, the well-to-do 
undertake to help themselves, and the poor are left 



172 Rural Wealth and Welfare 

without resources. It seems as if all the wheels of 
progress had stopped. 

Sard times. — Succeeding such a crisis must follow 
hard times. Wage earners generally are without 
employment ; manufactories have put out their fires ; 
the warehouses full of goods are under attachment; 
farm produce is moved very slowly to market ; fancy 
stock of horses, cattle and sheep are unsalable; farm 
mortgages are foreclosed as rapidly as the laws allow; 
skilled workmen meet absolute necessities by half time, 
and common laborers move from place to place in use- 
less search for employment, their families being barely 
kept alive by charity. The fact that warehouses and 
granaries are full leads to the assumption that over-pro- 
duction has destroyed the market and the demand for 
labor. This is quite probably true of all articles of such 
a nature as to be held for speculative purposes. The 
staple grains and fancy live stock are illustrations of 
these. An universal over-production, so long as the 
articles produced are adapted to current wants, is im- 
possible, since every man's product, if needed, is his 
means of securing another man's product to meet his 
own wants. 

On the other hand, the suffering of multitudes and 
the abstinence of everybody lead to the supposition that 
under -consumption, or failure to use what we might, 
is a principal cause. It is undoubtedly true that fear of 
absolute want checks consumption of articles within our 
reach. This is shown by the immediate increase of con- 
sumption as soon as the fear subsides. This, however, 
is a symptom of the times, rather than a cause. 



Hard Times 173 

Some theorists account for the suffering by the ratio 
of the currency to the population, claiming that a larger 
circulation of money will fill the empty pockets of the 
needy, forgetting that money circulates only through the 
very channels of trade which something else has stopped. 
It is quite true that any financial legislation involving 
uncertain results contributes materially to the doubt 
which stops the machinery. All efforts to make money 
worth less by legislation have invariably extended the 
period of hard times. Almost every conceivable cause 
has been assigned, or given as a partial explanation, for 
the stagnation of trade. A careful analysis of these re- 
curring periods in the history of our country in 1837, 
1848, 1857, 1873, 1887 and 1893, shows many partial 
causes of disaster in exchange, affecting the peculiar 
nature of each panic, yet one especial cause is evident in 
them all. That cause is large investment in fixed capi- 
tal from which no immediate returns can be expected. 

The chief causes of hard times. — Prior to 1837 there 
was a rapid development of new country, as shown from 
the greatly increased receipts for public lands. Every 
new home involves a permanent investment of some- 
body's savings to the extent of at least $1,000. With the 
settlement of every new region a considerable waste in 
real estate speculation is found. A similar expansion of 
territory occupied by settlement immediately followed 
the Mexican war, and was a chief cause of reduced capi- 
tal and consequent lack of employment. 

The crisis of 1857 was preceded by enormous waste 
in the Crimean war. To that was added the loss of a 
season's labor in a bad harvest and increase of cost of 



174 Rural Wealth and Welfare 

living, reducing profits. The latter cause was incidental 
to this particular season, but added materially to the suf- 
fering. In this country there had also been an extensive 
enlargement in iron works and woolen factories without 
corresponding products. 

The panic of 1867, felt widely outside of America, 
was preceded by immense waste of property in the civil 
war of the United States, a considerable portion of 
which expense, on both sides, had been borne in Europe, 
either during the war or immediately following, through 
the sale of bonds. 

The panic of 1873 followed immense investments of 
wealth in fixed capital, as illustrated in the Northern 
Pacific railroad, previously mentioned. Between 1865 
and 1873 30,£)00 miles of railroad were built in the 
United States alone. This permanent investment in- 
volved immense debts at home and abroad, with all the 
profits yet in the future. The fact that imports increased 
at the rate of nearly $100,000,000 a year in 1871 and 
1872 indicates the extent of expenditures. The Franco- 
Prussian war had also wasted great energies. 

The hard times in America, shown especially in the 
price of farms, about 1888 were immediately preceded 
by enormous investments in unsatisfactory farming 
lands and unneeded town sites, as well as in railroad 
building. Forty-nine million acres of land were sold by 
the government, and more than 12,000 miles of railway 
were built. Enormous expenditures were also made for 
school -houses, court-houses, and other public buildings 
by sale of bonds. The actual crisis was perhaps de- 
layed and a new speculation fostered by large payments 



Causes of Hard Times 175 

on the public debt. Again, there was expansion of 
credit and large investment in railroad and city build- 
ing in anticipation of future growth, during which the 
small savings of multitudes had been gathered up 
through the guaranty loan companies of the West. 
Upon the top of this came the expenditures of 1892 and 
1893 on the great World's Exposition. The expendi- 
ture of savings in attendance upon the exposition cur- 
tailed the abilities of hundreds of thousands of fami- 
lies. So the panic of 1893 was in no respect an excep- 
tion to the rule. No sufficient data are at hand for 
showing exactly how great has been the expenditure in 
unproductive enterprises, but a reference to Chart No. 
IV, p. 83, giving the development of railroad building 
in this country, will show how this form of enterprise 
in every case outran the increase in population immedi- 
ately preceding the hard times. 

It is evident to any student of the question that extra 
large consumption of floating capital has immediately 
preceded every period of supposed over-production. The 
chief over-production has always been in the machinery 
of production and trade, including the costly settle- 
ment of new land. The immediate dismissal of labor 
employed in such enterprises brings greatest suffering, 
because such laborers are always least forehanded and 
are in large numbers homeless. Such laborers also most 
readily become competitors for any kind of a job, and so 
affect current wages of those still retaining their places. 
This emphasizes the unequal distribution of wealth, and 
leads multitudes to call for a redistribution, by fair 
means or foul. This increases the distrust of com- 



176 Rural Wealth and Welfare 

munity and the disposition to hoard wealth in the form 
of money, while checking every desire to build for the 
future. 

Remedies for hard times. — The means of recovery 
from such a disaster are less easy to see than the causes. 
We know, in fact, that the world does recover confi- 
dence among enterprising men and confidence in the 
future, sometimes surprisingly soon. We can see some 
of the steps by which the burden of debt is diminished 
and hopes are revived. In the first place, some method 
of settlement out of the usual course is adopted. Most 
obvious is an agreement among banks to carry on the 
usual machinery of exchanges through checks, drafts 
and a clearing house without the use of currency. This 
is called suspension of payment. It holds the deposits 
steady while the transfer of ownership is easy. It saves 
the sacrifice of large credit to meet the panicky condition 
of small trade, and it checks the disposition to hoard 
money in out-of-the-way places. The actual failures 
are thus confined to those actually engaged in the 
wasted production or directly involved as creditors of 
such persons. The failures in 1873 were said to have 
been nine in each thousand business houses; those of 
1893 were thirteen in a thousand. The actual failures 
among farmers are confined almost entirely to those who 
have been caught in the speculative spirit of invest- 
ment in more land for the sake of increasing prices or 
have borrowed capital to be used in other speculation. 
A few only have wasted their substance in expensive 
homes and luxuries. 

If all forms of indebtedness could circulate freely, 



Remedies for Hard Times 111 

the final result in balancing debts with debts would be 
quite readily reached, and the actual losses would be 
found less than is generally supposed. An equal loss 
without distrust, if that were possible, would be met 
with new enterprise and extra energy instead of de- 
spondency. 

The various remedies offered in proposed legislation 
frequently add to the delays in the recovery of confi- 
dence. The issue of paper currency, while universally 
welcomed by the most wasteful of investors, makes 
those who still have property more doubtful as to the 
future. The proposition to increase demand for labor 
by great public improvements comes at a time when 
revenues are diminished and almost surely is coupled 
with a proposal of government scrip. To increase the 
burden of taxation at once, when the mass of the people 
are already burdened and distressed, is impossible. The 
issue of scrip, though actually a costly method of taxa- 
tion, seems to the unthinking a way of making some- 
thing out of nothing. The certain effect is to extend 
the period of doubt. Laws affecting the coinage and 
character of legal tender, since they disturb the rela- 
tion of borrower and lender indefinitely, postpone 
readjustment of confidence. Changes in the tariff laws 
are liable to have the same effect because of uncertainty 
as to where the influence will be most felt. Special 
legislation with reference to contracts for labor, how- 
ever well intended, are sure to hinder adjustment, and 
all agitation in favor of new experiments in government 
enterprises or in legislation as to property makes less 
available the capital and ingenuity of the people. 



178 Rural Wealth and Welfare 

Cure for hard times. — The only genuine cure involves 
a restoration of faith in enterprise. It is almost as hard 
to establish after a commercial panic as after a panic in 
an army. The remedies best worth study are really 
preventives, in the form of checks upon undue expan- 
sion of credits and distinct limits as to extension of 
time. Some have gone so far as to wish there were no 
laws for collection of debts, since this would actually 
prevent the great bulk of indebtedness; but it would 
also destroy the essential foundation of daily credit, one 
of the most productive machines of exchange. The 
best that can be done is to make more explicit the laws 
against frauds, and to limit easily transferred forms 
of credit to those whose foundation can be carefully 
inspected. It is very desirable that all corporations 
dealing in credit should be subject to the strictest exam- 
ination by a public officer. 

Short credits vs. hard times. — More important than 
legal enactments are the business habits of a com- 
munity, and these can be cultivated by business men. 
Farmers, of all classes of people, can foster such cus- 
toms of careful inspection of business standing and 
frequent settlement of accounts and careful loaning as 
will make a panic less possible. They need, however, a 
wider acquaintance with the machinery of business and 
a firmer faith in the advantage to all concerned of cash 
payments and absolute promptness in all settlements. 
The moral power of such a body, amounting to one- 
half the population, most of whom are solid own- 
ers of property, would, if well informed and united in 
principle, check most of the extravagances in expen- 



Short Credits Needed 179 

diture and investment which waste the capital of the 
country. 

Bankruptcy. — In closing the discussion of hard times, 
it is proper to mention a device for removing in part the 
discouragement of debts where ability to pay is entirely 
wanting. Of course, a settlement between debtor and 
creditors, in which the property of the debtor is divided 
among his creditors, is always available, leaving both at 
liberty to begin business anew with a knowledge of the 
worst that can happen. It seems possible to contrive 
bankruptcy laws in such shape as to secure a fair settle- 
ment of insolvent business whenever the business is 
evidently failing. If discovery of fraud or misrepre- 
sentation could cause immediate intervention in a bank- 
ruptcy court, the surest possible check would be brought 
to bear upon improper credits. It is certainly to the 
interest of all honest creditors and debtors that a fair 
settlement should be reached as early after insolvency as 
possible. Such bankrupt laws should be as wide reach- 
ing in their uniformity as government permits. If a 
national bankrupt law is not sufficient, the states should 
combine to establish in each the same general system. 



CHAPTER XIII 

TECHNICAL DIVISION OF LABOR 

Economy of minute division. — The advantages, limits 
and disadvantages of minnte division of labor are 
worthy of a more careful discussion, since they bear 
upon every kind of enterprise and all classes of labor. 
A large part of the century's progress in manufacture, 
and especially the development of machinery in produc- 
tion, has grown out of the extension of this principle of 
division. An analysis of the particulars by which great 
saving is made in the cost of production will help us not 
only to understand the facts better, but to extend the 
principle in various directions. In the outset it implies 
the united effort of several workmen in succession and 
in close combination upon a single product. It is said 
that a pocket knife, which we buy for fifty cents, has in- 
volved in its manufacture the services of seventy -two 
different persons, doing different things. The perfec- 
tion of its finish depends upon the perfection of each of 
these persons in his single act. The cheapness depends 
upon the readiness with which each act is performed, 
and the utility of every kind of power employed. 

A good illustration of division of labor may be found 
in the process of butchering hogs in a large packing 
house. The live hogs enter the building in the upper 

(180) 



Division of Labor 181 

story, while able to carry themselves on their own feet. 
Their weight then moves them easily on through all 
the stages of the process. Two men catch the hogs by 
hooking a short chain about the hind leg and slipping 
it into the notch of an endless chain power, which hoists 
them to the carrier, a continuous track upon which a 
roller attached to the chain may easily move. A single 
man wields the knife which sticks the hogs. Two men 
are sufficient to manage the scalding trough. One 
directs the machine through which the body of each hog 
is jerked to remove by brushes the mass of hair. Four, 
perhaps, may handle scrapers as the hogs are dropped 
upon a platform, and six more may use the shaving 
knives by which every particle of hair is removed. Two 
are needed with different tools for beheading; and one 
makes place for the gambrel. Two remove the feet at 
opposite ends, three with different implements are 
needed in removing entrails, two are required to halve 
the body, while another gives it the final washing. The 
result is that each hog has passed from the pen to the 
cooling room in less than ten minutes, and the hogs pass 
under the hands of these several men at the rate of eight 
a minute. Each man uses but one tool in one particular 
spot, and repeats that single act constantly. By a 
similar division of labor eighteen men are employed in 
skinning a single beef, a different knife being used for 
each particular part of the body, and all pass in regular 
routine over the ten or twelve beeves undergoing the op- 
eration. The rapidity of this motion can scarcely be 
conceived by one who has witnessed simply the butcher- 
ing upon a farm. All this is due to a minute division 



182 Rural Wealth and Welfare 

of labor into as many tasks as there are different opera- 
tions, each man having, if possible, bnt one distinct 
kind of motion. The saving is not only shown in the 
increased quantity of work, but in the uniform quality 
as well. All the workmanship is essentially perfect. 
These advantages appear more strikingly in the manu- 
facturing arts, where the so-called factory system has 
brought division of labor to perfection. 

A brief analysis of the advantages, limitations and 
disadvantages is worth our study, because of their pos- 
sible application to farm industry. So far they have been 
felt chiefly in contributory manufactures of farm ma- 
chinery, facilities for transportation, with all attending 
manufacture, and the factories consuming raw materials 
furnished from the farms. They apply equally well 
where division of labor is profitable in farm operations. 

Extra efficiency of labor. — Most obvious advantage is 
seen in the saving of the time of a laborer, both in 
learning the essential parts of his work, so that appren- 
ticeship is shortened to one -tenth or one -twentieth of 
the time required for a full trade, and in the far greater 
dexterity with which he works without change of tools 
or change of location or distraction of attention. Thus 
a raw hand in the course of a few months perforins his 
single task more rapidly and more perfectly than an 
expert workman who must know and practice all the 
parts of the business. While such a hand can scarcely 
be called skilled in a technical sense, in the narrow 
application of skill to one action he may be more per- 
fect than any skilled Avorkman. The fact that each 
man's work passes immediately under the inspection of 



More Efficient Labor 183 

another, whose motion must exactly correspond in time 
and adjustment, makes any costly oversight in the shape 
of executive labor very much less, since every step in 
the process tests every other step. It is also found that 
minute attention to a single detail tends toward the 
highest improvement by invention of every tool a\ d 
machine employed. 

Y/hile this system is not likely to foster the inven- 
tive spirit which brings out entirely new/prnu'oles in 
machinery, because the work grows easy by familiarity, 
it does make the workmen quick to invent the little 
devices that perfect such machines. A broader culture 
and more general trailing discovers the difficulties and 
devises the entirely neW method: the worker hits upon 
improvements. Watt invented the steam engine, but a 
lazy boy employed to move the valve hit upon the 
automatic movement. 

Increased efficiency of capital. — The efficiency of 
capital in production is greatly increased by minute 
division of labor. The shop room required for each 
man is reduced to the minimum space for himself and 
his material. His tools, while the most perfect possible, 
are the fewest possible. 

The machinery and motive power are used to their 
utmost capacity constantly, and the economy of larger 
engines and machines is well known. Possibly one -fifth 
of the power required to move all the machines used by 
ten men working as independent tradesmen would 
provide better motion, more constant and cheaper, for 
the ten working together under division of labor. The 
waste in starting and stopping of machinery is almost 



184 Rural Wealth and Welfare 

entirely avoided, and the condition of the machine for 
doing its work well is kept np to the best. A most 
important saving is in diminntion of waste. The 
shortened apprenticeship and the superior dexterity 
m^ke waste from blunders almost nothing. Still more 
noticeable is the saving from any waste of superior 
abilities, either strength or judgment, upon actions 
requiriB 0, little ability. 

Under- -Tribute division of labor a strong man is kept 
where he is needed and the child may serve where his 
powers are sufficient. The efficiency of women is 
recognized wherever applicable, and all the workers 
have their full abilities made constantly useful. More- 
over, the circulating capital represented in the raw 
materials is kept in use much less time than under the 
less effective system. Since any article of manufacture 
passes through all the operations upon it in very much 
less time, the interest upon capital employed in holding 
the material and in supporting the labor during its 
changes is indefinitely less. The quicker returns from 
this more rapid manufacture are everywhere recognized. 

Limits of division. — With all its advantages, division 
of labor is limited by circumstances. It can never be 
applied where, because of poor roads or peculiarities of 
temper or habit of life, the workers are naturally 
separated. The necessary isolation of the farmers for 
the sake of space makes any combination for the sake 
of economy in dividing their tasks almost impracticable. 
Even where farms are small, few advantages from 
division of labor by different kinds of work can be 
adopted. The farmers are too far apart to work directly 



Limits of Division 185 

into each other's hands. It is limited, too, by the 
natural demand for the products of labor. If the labor 
of one man can supply all need of iron work in his com- 
munity, there is no possibility of employing ten, even 
with a hundred times the effectiveness. This is well 
illustrated in the country store, which sells everything 
over the same counter. Not even the grocery depart- 
ment can be separated until the demand is sufficient to 
support two store -keepers in two stores. 

But even in places where division of labor is stimu- 
lated by demand, it can go no further than the number 
of distinct motions required in carrying through the 
manufacture of the article made. Indeed, economy 
requires that each motion should make a complete 
round, so that the work begins and ends for each 
worker with everything in the same position. The 
exception is when a motion with great exertion requires 
an interval of rest before a second. Two men with a 
cross-cut saw, although their motions are alike, do more 
than twice as much as one man, because of the relief in 
pushing back the saw. 

A most important limit, however, is made by the 
inconstancy of natural forces employed in any industry. 
This is notable in all the processes of agriculture. No 
matter how many workers combine in raising field 
crops, they can gain but few advantages from dividing 
their tasks minutely. Each laborer must be employed 
through the year, and the change of seasons requires 
that he be ready for all the operations of the different 
seasons in planting and tilling and gathering through 
all the succession. Ordinary changes of weather, cold 



186 Rural Wealth and Welfare 

or hot, wet or dry, windy or calm, make necessary 
changes in his labor. The uncertainties of each year as 
to moisture and heat require a variety of ventures, so 
that no farmer dares confine himself to raising but a 
single crop. Even under the most favorable conditions 
the different stages of growth are so intimately related 
that the watchfulness of the same interested manager is 
required at every stage. A delicate plant must be 
carried delicately, even in transplanting. More impor- 
tant still are the conditions of fertility, which make a 
rotation of crops and even mixed farming essential to 
highest productiveness. If each field must have its 
definite series of cropping and tillage, together with the 
application of animal manures, the advantage of these 
combined operations under the oversight and labor of a 
single farmer outweighs the advantage of more perfect 
division of labor. 

The result of all these limitations, so obvious in agri- 
culture, is that farm work is but slightly more effective 
or more continuous than it was hundreds of years since. 
While improved machinery has immensely reduced the 
cost of certain processes, a year's labor involves innu- 
merable changes of employment, so that no farmer in- 
quires, in hiring his help, for an expert in any direction, 
but wants a man of all work whose skill is largely inge- 
nuity in adjusting himself to the constantly changing 
duties. 

Suggestions of fuller division of farm labor. — It seems 
possible, with the improved condition of agriculture and 
the nearness of ready markets, to attempt a larger use of 
division of labor in several directions. A group of 



Division in Farm Labor 187 

farmers, well acquainted with the possible advantages, 
may classify their farms as grain farms, dairy farms, 
breeding farms, feeding farms and market -gardens. 
Such a community of interests would find not only the 
advantages of exchange between each other, as well 
as the rest of the world, but would soon build up bodies 
of expert young men in the several specialties, whose 
work would be at a premium everywhere. 

With these interests recognized, still greater division 
of labor is possible. An expert in the care of trees and 
prevention of diseases to fruits and vegetables can 
quickly find employment, and may perfect himself in 
all the requirements of successive seasons. A dairy ex- 
pert may find use for his superior knowledge and skill on 
successive tours among the dairy farms. Every farm 
large enough to employ several men gains some of the 
advantages of division by making each man responsible 
for a definite part of the farm work. The less the work- 
men are handled in gangs, the better each one's abilities 
can be trained to meet his responsibilities. These 
possibilities are greatly increased by every device for 
diminishing the effect of weather changes. Under -drain- 
age gives large advantages in this direction from length- 
ening the time during which the same operation can go 
forward. Means of protecting crops in the field serve a 
similar end. 

Perhaps the easiest application to be made in any 
neighborhood is a system of marketing, through keeping 
an expert collector and distributor of produce busy in a 
limited region. All the waste of articles too few to be 
carried to market is practically saved, and constant 



188 . Rural Wealth and Welfare 

association with the markets of the world is made pos- 
sible. Especially is this applicable to small fruits, milk, 
butter and eggs. If this market wagon can also serve: 
to carry the daily mail for all the neighborhood, the 
problem of rural delivery would be almost solved with a 
trifling expense. Even where such a measure is not 
possible, neighboring farmers may approach such results 
by combining for market and mail days in a circle, each 
taking a different day of the week when he will do his 
neighbor's errands. 

With increased confidence in mutual interests, it seems 
possible that specialists in various directions might grow 
up among a united circle of farmers. The use of ma- 
chinery and blooded stock can certainly be greatly in- 
creased by careful adjustment of interests. Great im- 
provements in seed and in methods of culture may be 
discovered by agreement among a body of farmers that 
certain individuals shall make a specialty of those im- 
provements. It is even conceivable that a rotation of 
crops might be carried on upon a dozen farms, while each i 
farmer gives his attention to his specialty. It would 1 
require, of course, a much closer combination in credit 
with each other than has yet been found among farmers. 
At the very best, however, farming must still remain the' 
most prominent illustration of limitation in the applica- 
tion of the great labor saving and capital saving by mi- 
nute division of labor. 

Disadvantages of extreme division. — The great addi- 
tion to wealth so distinctly traced to division of labor is i 
not gained without some disadvantages to the com- 
munity. Almost certainly the inactivity of body com- 



Disadvantages of Division 189 

pelled by confinement to a simple portion of a trade in- 
duces physical weakness. The health of workers in 
factories is often uncertain, and the average of life is 
known to be reduced. While steadiness of employment 
contributes to steady habits, the reduced activity con- 
tributes to weakness. Perhaps even more perceptible is 
the tendency toward narrowness of mind. Ingenuity is 
developed in the "Jack of all trades," although his 
information in regard to each one may be limited. The 
man who knows all about a very small part of one trade 
has little to stimulate his mind to exertion. Indeed, 
habit is liable to make his very action and judgment 
purely automatic. The fact that the raw hand can be 
quickly made effective makes the stimulation to self- 
education even less than in ordinary circumstances. The 
constant dependence of each laborer upon the routine of 
his work and his absolute dependence upon authority for 
his employment lead naturally to lack of self-control. 
A man may grow almost like the machine he handles, 
responding only to the demand of his overseer. These 
tendencies foster also a growth of class distinctions. 
Such workmen are thought of as operatives, held in a 
class by themselves. They may be expected to know 
little of the interests of community outside their own 
circle, and are often distrusted in matters of common 
welfare. They themselves distrust the leadership of 
those upon whose management they depend for em- 
ployment. 

All these disadvantages may be overcome by more 
community of interest among workers of all classes for 
their comfort and improvement outside their tasks. It 



190 Rural Wealth and Welfare 

is a fact that associations for the advancement of 
workers in social and political freedom and mntnal self- 
support have grown most rapidly in the neighborhood 
of factories, where division of labor is extreme. A 
truly, philanthropic spirit may be in entire agreement 
with the massing of labor for greatest accomplishment. 
The places of least development are always found where 
crowds of laborers work in mere gangs or wholly un- 
organized. The wholesome influences surrounding rural 
life are everywhere granted so far as physical develop- 
ment goes. They may also be granted in communities 
of general enterprise with reference to ready ingenuity 
and judgment. The farmer's boys moving to the cities 
carry not only physical strength and endurance but a 
mental capacity for ready adaptation to emergencies 
which develops into wisdom. The majority of leaders 
in great enterprises are still expected to grow up on 
the farm. This is undoubtedly in part due to the im- 
possibility of cramping by extreme division of labor. 
At the same time a partial application of its principles 
is needed to bring leisure for some general culture and 
larger acquaintance with the progress of the world. As 
the evils of factory life can be cured by attention, so the 
weaknesses of rural life can be removed by a careful 
study of its needs. True education in both quarters is 
essential as a means of mutual understanding and ad- 
justment of interests. 



CHAPTER XIV 

AGGREGATION OF INDUSTRY 

Or eat combinations .-—The tendency toward improve- 
ment by combination of laborers through the possibili- 
ties of division of labor leads to still larger combinations 
in so-called factory systems, and even to a combination 
of factories in large corporations. This tendency has 
been especially marked since the multiplication of labor- 
saving machines and more perfect systems of transpor- 
tation. Indeed, the possibility of extensive machine 
using, as well as extended division of labor, rests upon 
a combination of many forces under one general man- 
agement. Beyond these advantages, saving is found in 
the necessary care for waste products, which often may 
be turned into profit, greater freedom of action from 
closer community of interests, greatly enlarged facilities 
for marketing, and the best possible devices for hand- 
ling and transporting products. 

All these advantages in great establishments are 
readily perceived, yet some have doubted whether the 
gains are so distributed as actually to increase the gen- 
eral welfare. Farmers, perhaps, as readily as any per- 
sons, distrust the power of great corporations. Wage 
earners, generally, in the expression, "corporations have 
no souls," express their distrust of results. Yet so far 

(191) 



192 Rural Wealth and Welfare 

as they actually introduce improvement in production so 
that variety of products is increased and the cost of 
production reduced, the whole community gains in large 
measure the total saving. Any one can realize the ad- 
vantage by study of a single article of every -day use. 
In the middle ages the cloth in a garment was worth 
eight times the wool from which it was made. Now the 
value is chiefly in the raw product. The price of iron 
affects every farmer through the cost of his tools and 
implements or the quality of either. Compare the 
modern steel hoe, first in quality and then in cost, with 
the hoe of fifty years since. Then measure that cost in 
its relation to a day's work, as compared with the same 
measure in 1850. All are in this way benefited by re- 
ducing the exertion needed to procure any one article of 
use, since more exertion may be left for meeting other 
wants. If machinery and improved methods have en- 
tered less into the farmer's home life, he can find his own 
advantage from the range of such improvements in other 
directions by thinking what a pound of butter will buy 
for him today as compared with what it would buy before 
the period of machinery. (Chart No. XIV, p. 107.) 

The introduction of labor-saving machines is a direct 
addition to human power and economy of time, and a 
means of converting useless material to meet human 
wants. That a new machine throws out of employment 
workers in that particular field brings a hardship which 
ought to be shared by the multitude who are benefited ; 
but the probabilities are great that the improved method 
of manufacture will so increase the uses for the product 
as to bring into employment a far larger number of 



Advantage of Machinery 193 

laborers. The spinning jenny threw out of employment 
several thousand spinners in the old way, but in twenty- 
five years the cloth -makers in England had increased 
from less than eight thousand to three hundred and 
twenty thousand. The machines which in 1760 were 
thought to have ruined some eight thousand cloth- 
makers, in 1833 employed two million persons. This is 
only a striking illustration of what has happened in 
every direction. It is perfectly evident that communi- 
ties using the most machinery pay larger wages and far 
larger welfare to every laborer. It is not too much to 
say that the actual comforts within the reach of every 
laborer have been more than doubled within the last 
hundred years. 

A few illustrations of the actual saving in cost of 
production and distribution may be interesting. Com- 
plicated machinery can never be used in producing upon 
a small scale, just as a small farmer can never afford the 
use of a harvester. All the benefits of invention applied 
to machinery have come through its use on a large scale. 
A factory making a thousand pairs of shoes each year 
cannot use such machinery as the one making a million 
pairs will need. Each one of the million pairs, therefore, 
costs the world less than each one of the thousand pairs. 
Again the large establishment, like an immense saw mill, 
being obliged to care for its sawdust, may devise a way 
of making this waste product of use in pressed blocks 
for kindling, or possibly in buttons or wood ornaments. 
The waste of the shoe shop is only a nuisance, but the 
waste of a great shoe factory is ground and pressed 
into all sorts of useful forms. All such saving of 

M 



194 Rural Wealth and Welfare 

waste is so much added to the world's store of: 
wealth. 

That the large establishment saves unnecessary fric- 
tion is shown in the order of any great mercantile estab- 
lishment. It is still more noticeable in immense iron works 
separated from every other form of industry for the sake 
of freedom of motion. In these ways, principally, there 
is a saving of labor in the huge department stores, al- 
though the facilities for advertising, advantages for 
transportation in large bulk and the employment of ex- 
pert salesmen in every department contribute to the same 
result. The general expenses of an ordinary store are 
estimated at nearly 40 per cent of the difference between 
wholesale and retail prices. The same expenses in the 
great cooperative store at Paris, the Bon Marche, are 
only 14 per cent. While the controllers of capital in the 
large enterprises have the first advantage of such saving, 
the very necessities of their business compel a sharing 
with their employes and with the public. 

Even the so-called trusts, supposed to be contrivances 
for controlling the market, have really served in many 
instances the welfare of the whole community. A biscuit 
trust, in handling the most of the crackers in the market, 
saves great expense of advertising, a still greater expense 
in sales by traveling salesmen, or drummers, and im- 
mense waste of stock on hand through condensation into; 
fewer warehouses, reduces its insurance to actual -cost, 
and has brought to the public by means of all these sav- 
ings a greater variety of crackers of almost uniform 
quality suited to the fluctuations of demand at a reduced 
price. No one doubts that even the Standard Oil Com- 



Advantages of Aggregation 195 

pany, by means of its savings through consolidation, has 
at the same time preserved the general supply of oil 
from waste and brought it to every man's door, with a 
great improvement in quality, comparative safety in use, 
and an almost constantly diminishing price. 

The record of facts shows that with all the tendency 
to great aggregations, and so to concentration of power, 
masses of wage-earners have had their hours of labor 
shortened, have gained facilities for culture in libraries, 
lectures and voluntary associations, have gained habits 
more systematic, and regular methods of life with 
greater constancy of employment, have better protection 
of civil rights, better provision for education of children, 
a larger insurance against accident, and a better provi- 
sion for hospital care when disabled, The same system 
has provided methods for economical use of savings in 
joint stock companies, and cultivated a general unity of 
purpose and appreciation of others' welfare. Withal it has 
given to the mothers of families an immense increase of 
leisure for home -making, and at the same time has opened 
ranges of employment for women without homes. Even 
the rate of wages has not been diminished, but rather in- 
creased, as is shown also by actual records. That the 
great establishments cannot pay less than average rates 
is evident from the multitudes seeking to enter their em- 
ployment. Moreover, they must pay their workmen regu- 
larly or appear bankrupt. Employers on a small scale 
can easily postpone upon all sorts of pretences, and fail- 
ures are frequent. Suppose the distribution of milk in 
New York city were under a single management. A sys- 
tematic division of territory would at once reduce the 



196 Rural Wealth and Welfare 

number of milk wagons by at least one -half. The cer- 
tainty of responsibility would insure uniform purity, and 
means of transportation could be brought to perfection, 
so that the amount now delivered would actually cost 
perhaps not more than two -thirds the present price. 
While at present prices the profit would be large, the 
necessity for investing those profits would at once call 
for extension of the trade by reducing the price, and at 
the same time increasing the proceeds to farmers some- 
where who furnish the larger supply. The better quality 
and larger quantity for the same money would certainly 
increase the demand, and probably with direct benefit to 
the milk -raisers. The essential element of distrust of 
individual management in large enterprises as to fair 
distribution of the profits stands in the way of such a 
combination. 

Limits to aggregation. — It is easy to see that the 
advantages of great establishments cannot always be 
gained. The limits of demand restrict the possibility of 
profit in supply. The element of space in connection 
with the market and in relation to the buyers makes an 
important limit. Special advantages of location on a 
small scale may outweigh the advantages of aggrega- 
tion. Utilization of forces in nature, like pure water or 
water power, or special qualities of raw materials, may 
outweigh all other considerations. In general the 
requirement of interested oversight in a single superin- 
tendent has checked such growth. The more perfect, 
however, the system of management, the less effective is 
such a limitation. It is possible with extreme division 
of labor to make distinct rules take the place of per- 



Limits of Aggregation 197 

sonal direction, and oversight is reduced to a minimum. 
All these limitations serve to check the too rapid 
growth of this factory system and to hold in check the 
tendency to misuse of power in possible monopolies. 
Any raising of prices which diminishes the demand 
destroys the advantage of a great combination. It 
makes its profits by the quantity of its products sold. 
A reduction of the quantity much more certainly than a 
reduction in price destroys the advantage. Hence a 
monopoly gained in the ordinary progress of trade can 
seldom operate for any long time to advance prices, 
though it may destroy the competition of smaller estab- 
lishments completely. 

Disadvantages of aggregation. — It is impossible to 
overlook a considerable number of disadvantages to the 
welfare of a community in a too rapid aggregation of 
its industrial enterprises. It changes large numbers of 
laborers from independent workers to wage earners, 
and thus makes them a part of the great machine, with 
an immense momentum in production which does not so 
readily yield to the fluctuations of demand. An inde- 
pendent worker is not worried if he has a leisure day. 
The great establishment cannot adjust its machinery to 
a lessened demand without a uniformity of reduction in 
wages or time of employment, or else the discharge of 
numbers of employes. This is one of the causes of 
over-production so evident in certain directions upon 
the coming of financial crises. Another great disad- 
vantage is seen in the breakdown of any such enter- 
prise. Then its employes, trained for its particular 
uses, find themselves not only without employment, but 



198 Rural Wealth and Welfare 

unfitted to drop into other niches of usefulness. The 
absolute routine of the great establishment so fixes 
habits as to make very difficult a change of work 
except in line of promotion in a similar organization. 
The dissatisfaction and distress from such absence of 
employment is more apparent than in ordinary poverty. 

The strongest objections, however, to the great 
aggregations are found in the possibility of oppression 
through a monopoly of business, and therefore almost 
absolute control by a few persons of the interests not 
only of a large body of employes, but of every com- 
petitor upon a smaller scale. A large combination prac- 
tically compels all to yield to its methods. The certain 
economy of methods has led to the statement, "Where 
combination is possible, competition ceases." The com- 
mon saying, "Competition is the life of trade," becomes 
untrue whenever that competition implies a costly ser- 
vice. Competition is supposed to reduce cost by stimu- 
lating energy and ingenuity. But when that ingenuity 
can be better applied in combination, the result is the 
destruction of competition. Competition may drive the 
milk wagon faster, but combination will deliver more 
quarts of milk in the same time. The natural opposi- 
tion to combination rests upon the same ground as the 
opposition to improved machinery. It certainly throws 
out of their ordinary employment a considerable number 
of independent workers. 

This power of the combination is a constant tempta- 
tion to unscrupulous and grasping managers to increase 
their advantage by vicious discrimination and false com- 
petition, expecting the destruction of others' business to 



Disadvantages of Aggregation. 199 

increase their own. The largeness of the operation 
makes more plain the injustice of the maxim, "All is 
fair in trade." The final dangers of combination are 
thus likely to be overestimated. It is not true that any 
larger proportion of false methods of business enters 
into the large establishment than into the small, and 
the possibility of profit in a great combination is quite 
as truly dependent upon the universal welfare as any- 
where. The same extremes of prices mark the range 
for these establishments as for any others. The price 
cannot continue higher than buyers will pay with an 
increasing disposition to buy more. It cannot remain 
lower, of course, than will enable sellers to continue 
living as well as in any other business. Checks upon 
increased price come as certainly from substitutes as 
from rival production, and the ability of the people will 
always gauge the amount of sales. The expression 
" What the trade will bear," means a price such as not to 
diminish consumption. Indeed, the business principles 
of a great trust are essentially the same as those in any 
single manufactory. A trust which stops the work of 
certain factories in a combination for the sake of dimin- 
ishing the output, because of danger to prices from too 
rapid production, follows the same principle as a farmer 
who stops raising wheat from the probability of too 
much wheat in the market. The farmer would better 
lose the use of his land for a time than lose the 
advantage of both land and labor by over-production of 
wheat. In the same way a trust may wisely hold its 
fixed capital unproductive till the consumption of the 
community reaches the full extent of its power to 



200 • . Rural Wealth and Welfare 

produce. The power of one combination to interfere 
with the workings of another by indirect methods, like 
investment in the other's stock, is an evil to be treated 
like any fraud. Laws and courts are in the power of 
the people, and should preserve the rights of all. 

One great danger of large combinations is the 
tendency to govern by iron rule instead of by fair judg- 
ment of individual cases. This is a difficulty always 
connected with great enterprises, to be cured as growth 
advances through establishing well trained experts 
whose judgment makes the rules not only good in 
themselves, but well executed. The government itself 
is subject to the same difficulty, as seen in the handling 
of an army, and is obliged to meet it in the same way. 
Even the abuses often referred to from enormous differ- 
ence of wages between the executive officers and the 
inferior operatives are quite possibly only a natural 
method for solving these difficulties. A first-class 
officer has no difficulty with his men. In general those 
institutions whose management is costly do better for 
their workmen than the weaker institutions with weaker 
men at the head. 

The supposed dangers from too rapid improvement 
in the machinery of production are scarcely to be cred- 
ited in the light of improvements during the last hun- 
dred years. Every improvement has certainly given a 
larger enjoyment and better employment to the masses 
of people. The enterprise which invents better ways of 
accomplishing anything is the best possible means for 
enlarging and stimulating the wants and abilities of the 
whole people. The very profits themselves are sure to 



Advantages Distributed 201 

awaken larger enterprise, and even if the accumulated 
surplus is distributed in so-called watered stock, it does 
not cease to promote production. The wider the distri- 
bution of stock, the more permanent and more gen- 
erally satisfactory is the working of the great combina- 
tion. If employes themselves become sharers in the 
business, the true interests of all are likely to be pro- 
moted. When the savings of the multitude can be 
perfectly united in a joint stock company, to furnish 
the capital with which the same people work, the gen- 
eral conditions of wealth production for all the com- 
munity are fairly met. 

Bonanza farms. — -An illustration of some effects of 
aggregation may be seen in the enormous farms of the 
wheat regions of America. There machinery is intro- 
duced as far as possible, all work is methodically 
planned and executed, and wholesale rates in purchases 
and in transportation are secured. The result is that 
certain staple products, especially wheat, are raised at a 
cost far below the average cost to moderate farmers. 
The result is large profits upon the capital invested, in 
spite of the fact that such farms do not make best use 
of soil fertility and certainly do not maintain the best 
condition of soil for future use. This, however, is due 
rather to the nature of pioneer farming, which makes 
immediate use of the powers of the soil, than to the 
nature of the management. It is conceivable that the 
same ingenuity may continue the development of large 
farms under greatly improved agriculture. In that 
case the general effect will be much more widely felt 
than now. So far it seems that bonanza farming is 



202 . Rural Wealth and Welfare 

confined to a very few lines of production, where every- 
thing is bent in the direction of lessening labor instead 
of benefiting the soil or making homes. 

There is no question as to the general advantage of 
small farms in making farm homes. It is a question 
whether the general improvements in agriculture, except 
in machinery and its use, have not come from the diligent 
ingenuity of the small farmer in making most of his own 
acres. Ben Franklin said, " The best manure for the farm 
is the foot of its owner.' 7 The interested constancy 
among small farmers certainly develops both character 
and ability in any country. This fact has probably been 
one reason for the small farms of large parts of Europe. 
One -third of France is cultivated by owners of farms 
averaging 7% acres. Four -fifths of Bavaria, Belgium 
and Switzerland are in farms of less than twelve acres. 
Even Prussia has 900,000 farms of less than four acres. 
These farms vary in quality from poorest to richest, and 
peasant farmers are not able to boast of their wealth. 
Yet some of the most fertile regions are made so and kept 
so by the labor employed upon the small farm. Some of 
them also involve large capital. The Isle of Jersey, 
where land is worth $1,000 an acre, is so divided that 
an average farm is eight acres. Gf course, but little 
labor-saving machinery reaches these places. Tillage 
with the spade costs five times as much as tillage by 
plough; yet the small farmer finds such advantage from 
its use as to call it gold mining. It is probable that the 
strong competition of immense farms in grain raising, 
possibly also in sugar raising from either cane or beets, 
and in seed raising, will awaken among the smaller 



Advantage of Small Farms 203 

farmers attention to finer grades of farming and more 
care for the fertility of their fewer acres. 

On the whole, the tendency with increasing popula- 
tion is toward smaller farms with more intensive farm- 
ing. Whether our country, with its stronger commer- 
cial energy, will follow this tendency as exhibited in 
northern Europe seems doubtful. It is not likely that 
we shall ever admit the legal restrictions under which 
division and subdivision have made their way in that 
region. The question will doubtless be settled by eco- 
nomic conditions independent of legislation. At pres- 
ent we are far from either extreme, as can be seen by 
reference to Chart No. I, p. 9. 

Department stores. — Increasing application of the 
principles of aggregation is seen in the so-called depart- 
ment stores, which not only deal in everything but with 
everybody, extending their trade by mail over large ter- 
ritory. The very evident economy of such aggregation 
of capital for purposes of exchange appeals so directly 
to the customers as to make the sufferers in competition 
cry out in vain for restrictions. Such stores seem sure 
to maintain their advantage in exchange, except with 
reference to mere local distribution of every -day neces- 
sities and expert handling of specialties. The com- 
munity does well to give attention not so much to 
restrictions upon this trade as to reduction of oppor- 
tunity for abuse of power over the mass of employes 
under control. The great establishment will certainly 
bring more satisfactory conditions in. time than the 
multitude of small ones beyond the reach of public 
inspection. 



204 . Rural Wealth and Welfare 

Trusts. — Of late years the advance of combination 
in so-called trusts has been enormous. The under- 
lying principles of economy already illustrated furnish 
the occasion for such combinations, but the immediate 
advantage to promoters of such enterprises, because of 
the supposed power in control of the market, is found 
in the speculative interest in stocks. In this respect 
the multiplication of trusts will furnish the prin- 
cipal weapon against them. Yet the dangers to the 
industry of the country, as well as to the safety of ex- 
changes, from such rapid consolidation of management 
are easily perceived. It is certainly necessary that re- 
sponsibility for such enterprises be definitely fixed upon 
the share -holders. And it is more than probable that 
government inspection of such business may become as 
necessary as it now is of the banking systems of our 
country. Some students of the subject foresee a final 
assumption of absolute control by the government of all 
industrial enterprises as a result of this tendency to ag- 
gregation. The question cannot be discussed in this 
connection, since it involves a wider range of welfare 
than can be considered under production. 

Possible combinations for farming. — It is proper to 
close this chapter with suggestions as to the possibility 
of gaining the advantages of combination for farming 
communities without disturbing the present condition of 
ownership of land. When our farmers generally shall have 
outgrown the disposition to make money by emigration, so 
that each farming community is made up of farm homes 
with a stable population, more intimate associations for 
farm operations than now are possible ought to become 



Combination in Farming 205 

the rule. Suggestions have already been made as to the 
possibilities of greater division of labor, but other advan- 
tages of combination in the way of labor saving can cer- 
tainly be secured. More definite business methods and 
mutual confidence in a neighborhood of farmers make 
possible enormous economies in the way of mutual pro- 
tection and advantage. The removal of fences, with 
possible combination in seeding and tillage, a universal 
method of dealing with insects, blights, rusts and similar 
plant diseases, the handling of products in company, and 
above all a perfect sympathy in all methods of improve- 
ment, education and development of enterprise, will ac- 
complish wonders. 



CHAPTER XV 

SPECIAL INCENTIVES TO PRODUCTION 

Good government chief . — The productive energy of 
any country is encouraged chiefly by what we call good 
government. This means especially security of prop- 
erty rights by prevention of frauds and robbery of every 
kind, and free interchange of ideas, as well as of prod- 
ucts of industry, and general public intelligence. It 
is not enough that individuals throughout a community 
be fairly intelligent, but they must have sufficiently 
mutual ground of intelligence in common purposes and 
common interests in everyday work to bring without 
effort a perfectly mutual confidence. Where these essen- 
tials are absent no devices can operate extensively for 
the encouragement of energy in production. Where 
they are present it is always possible to add extra 
incentives, to give direction at least to the energies of 
the people, and perhaps to increase those energies. 
Some of these incentives are too important to be over- 
looked. 

Premiums. — The most simple means of encouraging 
enterprise is found in premiums of various kinds offered 
by individuals, local societies or municipal authority. 
These operate by adding to the natural advantage of 
energetic labor some special reward in recognition of its 

(206) 



Premiums 207 

accomplishment. Illustrations are familiar in connec- 
tion with so-called fairs of all kinds where prizes are 
distributed for the largest product of a kind, the most 
profitable crop, the best article for any purpose, the 
greatest variety of crops or stock, or for any conceiva- 
ble device which seems to add to the producing power 
of the community. Governments often offer premiums 
for plans of public buildings, and sometimes for offen- 
sive weapons. All % of these operate upon the one 
principle of arousing special energy by superior advan- 
tage given to the successful competitor. Its advantages 
are evident. Its disadvantages sometimes outweigh ad- 
vantages. It encourages somewhat the spirit of gam- 
bling, resulting in devices for winning the prize through 
false representation. It exaggerates the importance of 
showy qualities for the sake of notoriety, and it fosters 
those jealousies which too constantly interfere with 
the welfare of communities. 

Both advantages and disadvantages are well illus- 
trated in agricultural fairs. These have proved a most 
admirable stimulant to better agriculture, where clear- 
headed, intelligent judges have judiciously distributed 
prizes of such a nature as to have their chief use in 
establishing the quality of the product shown without 
catering too distinctly for the enthusiasm of the crowd 
or for individual profit. The chief end of all such 
incentives is rightly found in the educational influence 
from comparison of products and the establishment 
of standards which the whole mass of the people may 
be led to accept. 

Bounties. — A less common but extensively used in- 



208 Rural Wealth and Welfare 

centive is in bounties. These are advantages of various 
kinds, frequently in money, given by local or general 
authority for peculiar services or special enterprises. A 
familiar illustration is seen in the bounty of late years 
offered by different states for the production of sugar, 
especially sugar from beets or from sorghum. The 
object is evidently to arouse the energies of a community 
in a special direction, with the expectation that the 
establishment of a new industry will, in the nature of 
exchange, promote the welfare of all. Some countries 
have stimulated foreign exchange by a bounty upon 
exports, such as Germany now pays upon the beet sugar 
exported to other countries. Of the same nature are the 
gifts made by local communities for the establishment of 
mills, factories, railroads, irrigating ditches, all of which 
are supposed to bring profit to the community in general 
in much larger proportion than the special enterprises 
have received. The principle is the same when bounties 
are offered for the destruction of wolves, foxes and 
other vermin, or when standing rewards are given for 
the arrest of criminals. 

There can be no question of the right of a community 
to offer this extra stimulant to particular exertions, but 
the wisdom is doubtful. In the first place, bounties are 
liable to withdraw capital and labor from more certain 
methods of production to more uncertain methods. 
Indeed, the chief object of the bounty is to entice into 
experiments those who would otherwise hesitate. The 
advantage of the bounty is very liable to be overesti- 
mated. People hasten in steps to secure bounty without 
careful study of the business they undertake. This is 



Bounties 209 

especially true of bounties for establishment of factories 
in new locations. They attract the least experienced and 
most speculative men, without consideration of the far 
more important elements of immediate market and con- 
venient employment of labor. Railroads are built for the 
bonds voted without care for future profit. Enterprises 
of this kind, promoted by bounties, are especially liable 
to failure. The history of development in the west gives 
overwhelming evidence of their weakness. Even when 
the bounty is offered for reduction of vermin, it is often 
misapplied. Numerous cases are on record where the 
bounty became a stimulant to enterprise in raising 
the very animals to be destroyed.. Even rewards for the 
arrest of criminals seem sometimes to create a body of 
men who thrive by fostering a criminal class, with a hope 
of sometime getting a profit from arrests. As a means of 
stimulating general industry they are too unstable to be 
satisfactory. Most probably political parties are in con- 
stant contention over the maintenance of the bounty. No 
more insidious enemy to the purity of politics can be found 
than the selfish interest aroused by special bounties. 

Monopoly privileges. — Government monopolies have 
been a favorite method in past ages of fostering particu- 
lar enterprises. These are in the nature of an exclusive 
privilege, granted to individuals or corporations for 
:he manufacture or sale of particular commodities, 
and occasionally for special public services. These were 
once a method of showing royal favor, and the word 
monopoly has in its very nature the idea of inequality. 
Hence they are unpopular under all circumstances, ex- 
cept when permanent and universal advantage is secured. 

N 



210 Eural Wealth and Welfare 

License. — The monopoly of service is secured by the; 
issue of a license. If granted through official favorite- 
ism, the wrong is easily appreciated; if granted to all. 
who conform to necessary requirements for the gen- 
eral welfare, as in showing qualifications for teaching, 
compounding of drugs, or practice of medicine, the 
license is recognized as useful. In fact, it seems to> 
furnish security for satisfactory governmental service, 
and is the basis of all promised reform in civil admin- 
istration. 

Patent and copyright. — The chief illustrations of a 
genuine monopoly maintained by government authority 
are found in the patent upon inventions and the copyright 
upon publications. A patent is conferred upon the in- 
ventor of "any new and useful art, machine, manufacture 
or composition of matter, or any improvement thereof," 
upon proof that the invention is original, not previously 
in use anywhere, and likely to be beneficial rather than 
detrimental. This patent secures to the inventor the sole 
right to make, use or exchange articles manufactured 
after the pattern described, or upon the principle 
involved in construction. This monopoly is limited 1 
usually to a term of years supposed to be sufficient 
to secure to the inventor a reward for his exertion. 1 
The patent laws of the United States protect the 1 
rights of an inventor for seventeen years, entitling 
him to damages upon proof in the proper court ofi 
infringement upon his patent. Such protection 
extends, of course, only throughout the territory under 
the same government. It may be secured, however, in 
foreign nations under special regulation, so as to coven 1 



Patent and Copyright 211 

the most of the civilized world. The copyright serves 
the same purpose, and is limited in much the same 
way, for securing to the products of thought or of 
taste a proper reward for the powers exerted. It 
gives to an author control over publication of his 
thoughts during a period of twenty -eight years, in 
order that the users of his thoughts may actually pay 
what they are worth. This, too, is confined to the 
limits of the government issuing it, unless by agree- 
ment an international copyright is provided by the 
laws of the several countries. 

Franchises. — A still more noticeable monopoly is 

granted by municipalities under what is called a 

franchise for the establishment and maintenance of 

water supply, public means of artificial lighting and 

leating, or means of public transportation. These are 

mder government control usually in cities, because 

hey employ the public streets for carrying on the 

enterprise. The franchise is really an extension of the 

icense in particular directions. This is usually issued 

/nth the expectation of great public benefit from a 

arge investment of capital which would not be made 

vithout relief from competition, because not imme- 

liately profitable. The franchise usually carries with it 

ertain restrictions as to use of public highways and 

imitation to a term of years. It necessarily involves 

he right of government inspection and control for 

nhe general welfare. 

Difficulties from monopoly privileges. — All of these 
Jaonopolies are granted for the purpose of conferring 
ipon the whole community benefits that could not 



212 , Rural Wealth and Welfare 

otherwise be secured. They are wise only so far as 
they secure this result. If the patent right system, 
wastes the energies of inventors in contrivance of use- 
less devices, there is loss ; if it builds up a class ofi 
mere speculators, there is waste; if it fosters monopoly' 
beyond the giving of a fair reward for invention, it is- 
robbery. The exact limit of time during which a 
patent is good stimulates to the utmost exertion for 
wide introduction of its benefits, and at the samei 
time prevents the burden of lasting monopoly. Thei 
dangers are chiefly in the administration of patent 
laws, from the careless issue of undeserved patents, | 
or in a combination under a series of patents to main- 
tain a constant monopoly. It is a safe rule to issue 
patents only for particular applications of scientific 
principles and not for the discovery of the principle, 
which can be protected in publication by copyright. 
Departures from this rule cut off the possibility of 
more perfect contrivances and fair competition in de^ 
vices and methods. There can be no question of thCi 
general advantage of protecting a genuine inventon 
from the trespass of others to secure him a fair com- 
pensation. No other plan for a fair exchange of suchl. 
services has even been suggested. The unsettled ques- 
tion is the proper limit of time for a patent to run. 

The advantages and disadvantages of copyright am 
essentially the same in character, though the dangers; 
are less. Since the large part of the reward of ami 
author or an artist is in the repute he may secure, thereiji 
is little danger of fostering an unfair spirit of mo- 
nopoly. The franchise is subject to the same princi- 



Difficulties from Monopoly 213 

pies, but its dangers in practice are very great. So 
long as the advantages to the corporation securing the 
franchise may be enormous, if it is sufficiently ex- 
tended, there is great temptation to bribery, both in the 
original issue and in the maintenance of inspection and 
municipal control. Nothing has so interfered with good 
government of cities as the manipulation of franchises. 
These abuses underlie the popular call for municipal 
ownership of water works, lighting plants and street 
railways. 

Protective duties. — A still more widely extended 
method of stimulating industry by special incentives is 
seen in what is called a protective tariff. This is a sys- 
tem of duties upon articles produced in foreign coun- 
tries so levied as to check the natural competition by 
increasing their cost to consumers. The increased cost 
of such articles, if not too great to destroy the demand, 
increases the incentive to manufacture similar articles 
within the country. 

The schedule of tariffs becomes then a very impor- 
tant element in all productive industry, and requires 
:he nicest adjustment to the needs and abilities of the 
aation. If associated, as is usually the case, with the 
rising of government revenues, the adjustment be- 
comes more difficult, and requires the judgment of ex- 
perts in commerce as well as in statistical knowledge 
)f industries and government necessities. While in 
my country the existing tariff is presumed to have been 
istablished to meet public need, the fact that there is 
lecessarily a restriction upon freedom of exchange 
akes it always open to question. The tariff laws, like 



214 Rural Wealth and Welfare 

all laws restricting freedom of action, must always have 
evident reason for existing. The burden of proof rests 
with the one who defends such laws. This is especially 
true with reference to tariffs, because the trend of civ- 
ilization is certainly toward greater freedom of inter- 
course in all directions. The barriers between nations 
are generally giving way before the introduction of 
ready transportation and quick communication. The 
statesman who maintains the necessity of restrictive 
tariff must always stand ready to explain this obstacle 
to more complete association. For this reason we have 
the constant agitation of tariff questions and the im- 
possibility of permanent settlement in any particular. 

For the same reason there are always two phases of 
a tariff discussion. The student of social science in- 
quires chiefly as to the tendencies of advancing society 
with reference to such restriction, and, seeing the bar- 
riers becoming less and less, is likely to seek the final 
removal of every such restriction. The statesman, busied 
with the immediate conditions of the limited community 
whose interests he guards, is liable to be for or against 
any particular restriction as it fosters or hinders those 
interests. For this reason statesmen, of whatever 
party, are subject to the bias of local interests, and have 
even been known to change their views with a change of 
such interests. In our own country, when party lines 
are drawn upon the tariff, it is quite possible that sec- 
tional lines may also mark the party supremacy. In 
fact, it is possible for any man to believe in freedom 
of trade as the ultimate condition to be sought, while 
he favors in immediate practice restriction or even 



Protective Duties 215 

prohibition by a definite tariff. The purpose in this 
chapter is to give a brief outline of arguments for and 
against such tariff in general, leaving entirely to prac- 
tical statesmanship the decision of special questions. 

Reasons for protective tariff. — A system of re- 
strictive tariffs is thought to contribute to the welfare 
of an entire community by artificially increasing the 
natural diversity of employments. If new enterprises 
can be fostered, exchanges are greatly increased, all the 
advantages of exchange are secured within the country, 
and the general intelligence of the people is increased. 
With this comes the enormous advantage of what is 
called a home market for the cruder products of in- 
dustry. This is especially to the interest of farmers 
raising bulky products or those not likely to bear trans- 
portation. It is further thought to foster a better agri- 
culture by a more natural return to the soil of elements 
removed in cropping, the nearer body of population 
making such return possible. It is also thought to 
make at once available the natural resources of a coun- 
try in mines, quarries, water powers, etc., which might 
otherwise long remain useless. It is contended for as 
a means of checking unfair competition between a long 
established community with special advantages for fac- 
tory methods, either in large accumulations of capital 
or low wages of laborers, and a newer country where 
capital is scarce and wages are high. It is sometimes 
held to be a means of maintaining a high standard of 
wages through the advantage actually conferred upon 
certain lines of industry, upon a supposition that com- 
petition at home without these favored industries would 



216 Rural Wealth and Welfare 

reduce the wages maintained in other industries. If a 
tariff on wool calls into profitable use a large amount of 
farm capital in sheep raising, every wheat raiser is at 
the same time benefited by reduction of competition in 
the wheat market. If the capital and labor employed 
are enticed from other countries, the effect is the same 
by increasing the demand at home for the wheat. That 
this does not operate so long as wheat raisers come to a 
market where a surplus must be consumed in other 
countries does not destroy the argument, since the ten- 
dency is to reduce the surplus. The system is also 
thought to encourage, in lines of industry likely to prove 
productive, a rapid development of labor-saving ma- 
chinery and new methods of manufacture, which may 
some time give to a nation superiority in the markets 
of the world. To many there seems a much more im- 
portant reason for restrictions, in order to establish 
every needed form of production for the sake of na- j 
tional independence. That nation which contains i 
within its own borders the means of supplying all the 
wants of its people is supposed to be more capable of 
independent growth, and to be freed from hampering 
competitions of trade, that may lead to wars and, per- 
haps, to extreme suffering in case of foreign war. 

For abundant examples in support of these various 
propositions, appeal is made to the history of the world 
by comparing countries developed under a restrictive 
tariff with less developed ones free from such restric- 
tions. The history of our own country, under the ups 
and downs of tariff legislation, is also appealed to. 
Even the extra cost of certain articles to the whole 



For Protective Tariff 217 

people, which is the sole basis of advantage to the 
fostered interest, is thought to be more than compen- 
sated by the direct advantage of increasing competition 
at home, where it will have the most wholesome effect 
upon the market price. Proof of this, too, is sought in 
the rapid development of iron and steel manufacture, 
where protective tariffs have been most persistent. 

Reasons against protective tariff. — Against a system 
of protective tariffs many strong arguments are not 
wanting. It is contended that a tariff on iron goods, for 
instance, is just so much an added burden upon all con- 
sumers of iron, and, since the bulk of consumption 
enters into the cost of articles of universal use, the 
greater part of the burden is borne by the poorer 
classes of people, who consume as much as the more 
wealthy. If the restrictive tariff actually limits the intro- 
duction of foreign goods, as must be the case if it acts 
as a stimulant in production, the revenues received 
are far from being in due proportion with the cost to the 
people, since essentially the same tariff is paid by the 
consumer whether the article is imported or manufac- 
tured at home. Although it is not true that in every 
instance the tariff is a tax, in so far as it benefits the 
home manufacturer by advanced prices it must be. In 
so far as it operates for protection of favored industries, 
it certainly fails to serve the purposes of revenue. The 
diversity of employment evidently fostered by tariff is 
said to be unnatural and likely to continue expensive, 
and any advantages of market at home are sure to be 
overestimated, especially with reference to staple prod- 
ucts of the farm, since the surplus necessarily forming 



218 Rural Wealth and Welfare 

a basis for prices must be sold in foreign countries 
without the advantage of direct exchange for articles of 
their own production. That is, if our tariff restric- 
tions limit the market of a foreign people, they also 
limit the ability of that people to purchase the products 
wmich we are obliged to sell them. It is contended 
farther that a rapid development of varied industries, 
instead of maintaining soil fertility, tends to more rapid 
exhaustion by making more probable the consumption 
of cruder products of the farm in villages and cities too 
remote for return of fertility, although within the same 
country. The development of natural resources under 
stimulant of a tariff is admitted by its opponents, but 
represented as a waste of effort, since the tendency is to 
withdraw capital and labor from more productive indus- 
tries into less productive, and that, too, at the expense 
of the more productive. If factories cannot give an 
equal profit with farming, it is absurd to tempt capital 
away from the farms into factories. So, although 
wealth may be accumulated in showy enterprises, the 
people, as a whole, are less thrifty and bear ud equal 
burdens. It is further contended that the total labor of 
the community, when a part is used in unprofitable de- 
velopment of resources, is made on the whole less pro- 
ductive, and therefore the people are less able to buy 
their neighbors' products, and must live with diminished 
comforts. In that case all the haste in developing nat- 
ural resources is actual waste. 

If, on the other hand, the restrictive tariff invites 
capital from abroad for the sake of gaining the trade of 
a country, the diminished profit of labor in some foreign 



Against Protective Tariff 219 

country compels emigration, and such emigrants are 
likely to follow the capital. Only the poorest of foreign 
laborers will be compelled to help themselves by emi- 
gration, and only those will gain by the change of loca- 
tion. Thus it is said a restrictive tariff encourages the 
least desirable form of immigration. This is illus- 
trated in the development of the mining industry 
through the fostering effects of the tariff. 

There can be no question that any restriction upon 
trade may foster the contrivance of combination to 
secure monopoly. Hence it is often claimed that the 
existence of trusts is due in great measure to tariff 
restrictions, preventing the competition natural in the 
commercial world. It is certainly true that the restric- 
tion of a patent right may make possible the abuses of 
a trust. If trusts were confined to protected industries 
or to countries maintaining protective systems, the 
weight of the argument would be stronger. It is cer- 
tainly true, however, that the wider the range of com- 
petition without restriction, the greater the protection 
against combination for sake of monopoly. The mo- 
nopoly in kerosene oil would be a greater menace but 
for the possible check of competition from abroad. 

Such artificial restrictions, again, prevent the natu- 
rally rapid growth of international commerce, which 
gives the surest foundation for more permanent condi- 
tions of peace and greater extension of welfare over the 
world. The tremendous interests of the commercial 
world are the strongest safeguard against unnecessary 
warfare, and the best protection to any nation is the fact 
that it makes itself needed by all the rest of the world. 



220 Rural Wealth and Welfare 

Thus inter -dependence of nations rather than inde- 
pendence is the essential aim of those who seek the 
world's welfare. An alliance of two peoples for com- 
mercial purposes is the best guaranty of mutual support 
of national institutions. 

In proof of all these statements, the experience of 
the world in widely varying regions is appealed to. The 
natural breaking down of prohibitory tariffs has given 
opportunity for observation. Especially has the com- 
merce between states of the Union, where it is abso- 
lutely free, shown the general advantage of such free- 
dom in rapid development of wealth and welfare. While 
these states have a common interest in government, they 
are nevertheless widely distinguished in peculiarities 
of local government and in characteristics of people. 
While, therefore, there is possible doubt as to the 
wisdom of rapid removal of restrictions, there is every 
probability that such restrictions will gradually be out- 
grown. Even the temptation to make retaliatory duties, 
where other governments restrict against our products, 
is growing less with increasing experience of the true 
advantage in exchanges. The world is gradually com- 
ing to see that the better market any region of country 
affords for the rest of the world, the better market the 
rest of the world affords for it. 

Incidental tendencies from tariff. — The incidental 
effects of restrictive tariffs, and especially of the neces- 
sary instability of restrictive legislation, are too inter- 
esting to pass by, though very limited space can be 
afforded them. In the first place they contribute to a 
speculative enterprise which leads to waste of wealth in 



Incidental Effects of Tariff 221 

unpromising undertakings because of a necessary over- 
estimate of the advantage given. On the other hand, a 
reduction of the same tariff after a series of years is 
almost sure to bring panic in that line of industry pre- 
viously fostered. So the fluctuations of tariff laws are 
one element in periodic expansion and contraction of 
business. The tariff laws are certain, also, to involve the 
worst element of influence through the lobby upon 
legislative bodies. Even though the charge of bribery 
be utterly false, the general respect for legislative bodies 
is lowered by charges and countercharges for political 
effect. As an occasion for such charges scarce any 
other form of legislation serves as well. Even the peo- 
ple themselves are easily assumed by their neighbors to 
weigh their opinions upon a tariff measure by their per- 
sonal interests. 

The indirect influence of a new tariff law upon the 
industries of a country can scarcely be foreseen. So 
interlocked are all the varieties of manufacture and 
trade that a change in price of any one article of com- 
merce may affect hundreds of others, sometimes much 
more than the article restricted. It is easily seen that a 
duty upon iron of a particular shape or quality may 
actually prohibit the use of that iron in some product 
which already touches the margin of profit. These in- 
cidental effects can scarcely be foreseen by even the 
wisest statesman. The practical adjustment of con- 
flicting interests in the framing of tariff laws should be 
the work of experts. If all parties could unite in estab- 
lishing a bureau of commerce, domestic and foreign, as 
dignified as the Supreme Court of the United States, and 



222 Rural Wealth and Welfare 

as independent of party interference, such a body might 
frame a consistent tariff law, gradually perfecting it in 
adjustment to all interests and explaining its bearings 
to all parties. Such a body could take account of the 
great interests of agriculture in the commerce of the 
world, and weigh properly the indirect influence of re- 
strictions. The marked influence of fluctuating tariff 
upon sheep raising, so familiar to all farmers, might 
then be fairly appreciated. Under present methods it 
is very certain that any tariff law is largely a compro- 
mise, with limited judgment, between agitating conflicts 
of interested promoters. The farmers, of all people, can 
afford to be conservative of all interests, and should 
favor such methods as will work toward enlargement of 
commerce without destruction of industries. If possi- 
ble, they will wisely seek the removal of tariff questions 
from practical politics. 

In concluding this subject, it is wise to suggest that 
the true principle of regulations for national industry 
are the same as those for true family economy. The 
family should so plan its work and ways as to make the 
best possible use of the powers of every member. It is 
no economy to buy cheap things unless the members of 
the family can be better occupied than in making them. 
It is poor economy to make those things which cost more 
time and effort than would be used in making some- 
thing else for exchange. Home production is best when 
this makes the home labor more effectual, but worst 
when it interferes with the profit of labor. The farmer 
who stops harvesting to mend his harness when he 
might employ the harness -maker is wasteful; but if he 



True Economy of Tariff 223 

mends it on a rainy day he saves time which would 
otherwise be less profitably used. So the nation whose 
capital and labor are not well employed may do wisely in 
developing new industries, even at a considerable expense 
for introducing the new industries. But if all the na- 
tion's energies are profitably employed, the costly 'de- 
velopment of resources may wisely wait for future 
capital and labor. So all special incentives require a 
constant inquiry as to beneficial results supposed to 
follow, and the policy of the government must conform 
to the needs of general welfare. Even vested rights are 
subject to the law of welfare involved in the original 
act establishing special privileges. Public use, not pri- 
vate interest, is the true reason for the existence of any 
such privileges or protection. 



CHAPTER XVI 
BUSINESS SECURITY 

Conservative influences. — We have already seen the 
influence of governmental organization upon various 
phases of production; but the chief fostering influence 
is the general stability of a community, not only in its 
laws, but in its customs and habits of life. Security in 
property rights is a chief condition for accumulation 
of wealth, and a still more necessary condition for 
industry. Not even want will drive people to industry 
when there is no certainty of possession when the work 
is accomplished. The fruits of industry must be safe. 
While the laws of the country are naturally considered 
the guardians of rights, the customs and habits of the 
people, the actual origin of laws, are even more impor- 
tant. Bad habits actually nullify good laws, wmile bad 
laws may be made quite endurable by good customs. 
Thus, the welfare of every community depeuds upon a 
conservative social influence, preventing abuse of oppor- 
tunity for injury and stimulating individual energy. 

The rights of life, liberty and property must first be 
dear to the mass of the people before laws can be framed 
for their protection. This is especially true in a self- 
governing people, but is essentially the same in the most 
absolute tyranny. So the chief safeguard for every kind 

(224) 






Conservative Influences 225 

of business is the honest character of all business men, 
and such influences as establish good character and sound 
judgment will be fostered on the simplest business prin- 
ciples. The farmer who sells his grain or his fruit by 
false samples cannot complain of false weights and 
measures at the elevator. The one who gloats over vic- 
tory in a horse trade has no right to grumble at a trick- 
ster in wool buying. The man who is caught by the 
offer of a gold brick is not only foolish, but false, and 
diminishes the securitj^ of himself and everybody else in 
fair bargains and genuine business. The man who takes 
advantage of his ignorant neighbor deserves to be at the 
mercy of a more crafty dealer. Every one who makes a 
false use of power over a workman beneath him may ex- 
pect a false use of power from an authority above him. 
So all business interests, as well as all rights, are secured 
by the right spirit in all men. 

Nature of insurance. — The fundamental activity in 
accumulation of wealth is foresight ; but no foresight can 
prevent all disasters. Fire, flood, wind and wave are 
beyond control, because in some sense they are beyond 
knowledge. Against such forces no foresight can secure. 
The name insurance is given to every method by which 
:he burden of such unforeseen losses is provided for be- 
forehand and fairly distributed. The average of such 
losses can easily be estimated by experience. Statistics 
(mow a wonderful uniformity in the misfortunes of life 
m well as the fortunes. Even though chance be an ele- 
nent in every transaction , the average of chances can be 
listinctly calculated ; and that average is essentially con- 
stant among a sufficiently large number of instances. 



226 Rural Wealth and Welfare 

All are familiar with the application of such calcula- 
tions in fire insurance. Among ten thousand houses ai 
certain number will be destroyed by fire every year, 
provided those houses are widely distributed under 
essentially similar conditions. The ten thousand house 
owners can insure each owner against entire loss of his 
house by mutual agreement to meet their share of the 
total loss. If ten houses are burned, each of the ten 
thousand house owners will pay one-thousandth part of 
the total loss, making a burden easily provided for. If 
at the beginning of the year each has laid aside this- 
sum , the loss will be met when it occurs without disturb- 
ing the welfare of any. The machinery for such provi- 
sion is called an insurance company, and the separate • 
payment of each house owner is the premium or award 
expressing his share of the provision. This principle' 
of estimating losses and providing a definite way of 
meetiDg them is the same in all forms of insurance. It 
has been recognized for hundreds of years, but only re- 
cently has entered into the business life of the world in 
all directions. For a long time false notions of reverence ■ 
for the power that wields destiny stood in the way of 
such distribution of misfortune; but now the mass of 
people everywhere regard such foresight in united sym- 
pathy as natural as the planting of crops. 

Various methods of insurance. — Satisfactory insur- 
ance rests upon certain definite business principles which 
every insurer may wisely study. There are various de- 
vices for accomplishing the same end. A body of men 
sufficiently large to make the average of losses uni- 
form may bind themselves by a simple agreement to 



Methods of Insurance 227 

meet each loss as it occurs. To make this plan satis- 
factory they will need efficient business men as officers 
to devise means and methods for making the agreement 
effectual, for estimating the actual loss in each case, and 
for distribution of the claim by assessment sufficient to 
cover the loss and the expense of collections and esti- 
mates, as well as the maintenance of the officers. These 
officers must maintain the business standing of the or- 
ganization in the community, so that it shall continue 
for a long series of years to keep its numbers large 
enough to maintain only the average loss. 

This is a simple mutual insurance company, upon 
the assessment plan. Its weakness lies in the compara- 
tively slight interest taken by each member in the 
selection of its officers, in the absence of security for 
the payment of assessments when needed, in the long 
plelay liable to attend collections, and the uncertain 
interest of the officers in exact adjustment of losses. 
Such companies are liable to be too small to give a fair 
average of losses, and in any serious emergency to fail 
? or want of expert business ability and trustworthy 
•haracter in officers. 

If, instead of the assessment after losses, a definite 
percentage of probable loss is paid in advance, the re- 
sponsibility for use and maintenance of such funds calls 
:or a business character and ability in the officers 
ft r hich usually secures better results. It especially avoids 
;he danger of slackness and failure on the part of the 
usurer. It leads to closer scrutiny of actual losses, and 
lelps the insurer to more carefully measure his interest, 
dnce he already has an investment in the business. Any 



228 Rural Wealth and Welfare 

overestimate of expected losses may be returned in divi- 
dends to the insured, or may be retained as a surplus 
for security against losses above the average of experi-j| 
ence. The only weakness of this method is in the power 
entrusted to individual officers, elected on the ground of 
popularity by comparative strangers. Even when a 
board of directors chosen from well-known business 
men is added to the machinery, the dangers from in- 
competent and dishonest management are not avoided. | 
Such directors are too prone to consider their name 
their only contribution to the welfare of the associa- 
tion. 

A joint stock company, insuring with definite pre 
mium, is likely to bring the best business management, 1 " 
the quickest though not always the fairest adjustment ; 
of losses, and the confidence of the business community. 
Its prosperity, however, is hindered somewhat by the ] 
common judgment that the interests of the stockholders 
must be against the interests of the insured. The actual ! 
cheapness of insurance depends not so much upon the- 1 
amounts paid from time to time as upon the actual qual 
ity of the insurance purchased. Assessment companies ! ^ ! 
of all kinds, without a legal lien upon definite property,! 
are decidedly lacking in quality, since their guaranty off 
payment involves the financial credit of every person 
insured. No one should be deceived by the promise of* 
insurance at cost, until he knows exactly how genuinef 
that insurance will remain during the period of years for 
which he desires it. 

Governmental control of insurance. — The essentia]* 
importance of insurance and the difficulties of pro vi ding | ] 



i 



Control of Insurance 229 

against fraud and mismanagement have led naturally to 
government inspection, and in some countries to govern- 
ment control of insurance agencies. The laws of various 
states provide differently for inspection and reports, and 
restrict the action of companies in various directions, 
[t is probable that time will develop the necessity of 
greater uniformity of insurance laws and more definite 
requirements in the way of published reports and expert 
nspection. At present, insurance commissioners often 
lave the confidence of neither companies nor people, and 
10 expert knowlege is demanded in the candidate for 
hat office. 

The desirability of insurance by government direct 
3 questioned so long as governments themselves are un- 
table and popular will favors laxity in the business 
lachinery. That insurance could in this way be made 
heaper is a matter of doubt while great masses of 
eople magnify tfheir claims against government and 
linify their obligations to it. Frauds against govern- 
ment in both taxes and claims are proverbial. At any 
lie, governments will not wisely undertake the indefi- 
ite applications of insurance until larger experience and 
ider acquaintance with the methods in vogue are 
mched. 

Applications of insurance. — The applications of in- 
irance are indefinite in variety. There is no limit to 
le possibilities except in the lack of experience to 
ttle the average of hardships. Insurance of property 
gainst fire and storm is well understood and almost 
rery where practiced. Insurance of life is almost equally 
itended, in which the head of a family may in a meas- 



230 • Rural Wealth and Welfare 

ure provide against the suffering of his family in his un- • 
expected removal by death. This is easily extended into) 
insurance against accident. In this, as in life insurance,^ 
there is some lack of experience, as yet, as to the actual I 
cost. It is possible even to insure against dishonesty of 
employes through so-called bond and security com- 
panies, which issue bonds for definite amounts payable 
in case of failure of the person whose character is in- 
sured to meet the expectations of his employer. Suchi 
companies, in their own interest, exercise an influence 
over the character of those for whom they have given 
bonds by attention to their habits of life and business* 
methods. They make more prominent the maxim, 
"Honesty is the best policy," whether they actually, 
cultivate honesty in fact or not. 

There is no conceivable limit to the possible applica- 
tions of the principles of insurance. It seems possible 
that a body of business farmers, subject as they are to 
so many disasters from weather, insects and contagious- 
diseases of stock and vegetation, might devise methods- 
of equalizing and diminishing the disaster from such 
losses in a common system of insurance. As a basis fori 
such systematic action, careful statistics for larger 
regions of country are absolutely necessary. With such 
losses clearly presented and averages fairly estimated, 
insurance would be just as feasible as it is now against' 
fire. It will be wisely undertaken first upon such mat- 
ters as can be most definitely measured in dollars and 
cents. Losses from accidents to teams and other live' 
stock have already been studied and insurance to a lim- 
ited extent attempted. The difficulties of such insur- 



Applications of Insurance 231 

ance are greatly increased by the ease with which owners 
may contrive to market unsalable stock through a false 
representation of misfortune. The possibilities, how- 
ever, of extending the advantages of insurance in a 
business of this nature are worthy of more careful 
study. 



PART II 

Distribution op Wealth for Welfare 



CHAPTER XVII 

GENERAL PRINCIPLES OF FAIR DISTRIBUTION 

Wealth distributed, not welfare. — In considering the 
principles of fair distribution among all the parties con- 
tributing to production of wealth, it is necessary to 
remember that wealth and not welfare is the subject of 
thought. A child may have equal right to welfare with 
his father, but cannot in any sense have equal ownership 
of wealth. The welfare of a complete imbecile may be 
the care of the state, but he can in no sense control 
wealth. Distribution of wealth cannot, therefore, include 
the subjects of charity, but must be confined to a study 
of the natural relations between individual owners of 
wealth or individual contributors to production, which 
make control of a portion of accumulated wealth essen- 
tial to individual welfare. 

A pound of tea may include in its value the efforts of 
a hundred different persons. What are the principles 
upon which those hundred people may be fairly compen- 
sated by the actual consumer of the pound of tea ? This 

(233) 



234 Rural Wealth and Welfare 

illustrates the complexity of the whole subject of distri- 
bution. No drinker of tea would dare to settle the ques- 
tion of fair distribution arbitrarily. No one would even 
offer a theory by which a perfect settlement could be 
reached. Yet when the pound of tea is put upon the 
pantry shelf, the fifty cents paid for it has already been 
divided into a hundred unequal portions adjusted by 
some method of custom to meet the ideas of every helper 
in, the long list. Each has had some portion of the 
wealth produced, though the distribution may have taken 
place in different countries, under different laws and 
customs, through a period of months or years. This 
distribution involves the whole question of industrial 
freedom, and rests finally upon the principle of equity 
as applied to ownership of one's powers and the product 
of those powers. It also involves, to a certain extent, 
the decision of what is properly wealth and what is 
properly a part of universal welfare. 

The important questions connected with the subject 
will not be satisfactorily settled until a reasonable 
adjustment of all claims is reached by the masses engaged 
in production. The modern discussions of the interests 
of laborers are proof that the world is thinking more 
and more of individual rights in property, and no 
sweeping assertions as to inequity of property rights 
help to solve the questions. It is because each individual 
has a distinct equity in what is produced in part by his 
efforts that there is need of better adjustment. All re- 
forms, therefore, must be along the line of fair distribu- 
tion, or fail of their end. 

Distribution by exchange. — Ordinary observation 



Distribution by Exchange 235 

shows that distribution is made chiefly in the customary 
method of exchange. A pound of butter may find its 
way from the farmer's dairy to the actual consumer in 
a distant country. In its final value, the consumer 
compensates the retail dealer for his services in hand- 
ling it and for advance payments, including every other 
handler and every other service, down to the boy who 
drove the cows to pasture. If the system of universal 
exchanges is free and fair, each has received his fair 
compensation. In general, then, distribution of wealth 
is made automatically in the ordinary processes of pro- 
duction, exchange itself being one of the steps by 
which value to the consumer becomes value also to the 
producer. 

Fair exchange above laws. — Under perfect freedom 
of exchange, the general law of supply and demand 
already illustrated is more effective than any laws can 
be in adjusting wages or profit to efforts in production, 
and in adjusting interest or rent or both to the capital 
employed or to other means of production controlled. 
Any customs or laws which interfere with natural con- 
ditions of supply and demand hinder rather than help 
toward a fair adjustment. In any progressive com- 
munity such laws will surely fail, for the reason that in 
making such laws human nature is in conflict with 
itself. The history of increasing individual welfare in 
any part of the world gives a story of more ready and 
free competition in open market for all commodities and 
all services. In perceiving this we must not overlook 
the fact that fraud and ignorance, as well as arbitrary 
power, stand opposed to fair exchanges. Nor must we 



236 Rural Wealth and Welfare 

be satisfied with any condition which involves meeting 
restrictions with restrictions or force with force. Snch 
conditions must be bnt temporary. 

Actual and nominal compensation. — In considering 
compensation for any services, it is necessary to distin- 
guish carefully between the actual compensation in wel- 
fare and the nominal compensation in money. A farmer 
in Nebraska may get a larger return for his labor with 
corn at 15 cents a bushel than he could in Massa- 
chusetts with corn at 40 cents a bushel. Just so a 
wage -earner, receiving $1.50 a day in Ohio, might lose 
in welfare by exchanging work with his neighbor in 
New Mexico, who gets $2.50 a day. This means that 
$1.50 in Ohio may buy more comfort than $2.50 can 
buy in New Mexico. This is very important in com- 
paring the wages of different classes of workmen in the 
same country, as well as the wages of similar workmen 
in different countries. It has an important bearing, 
too, upon relative profits and interest. The actual com- 
pensation in welfare is the natural basis for adjustment 
in all distribution, and the law of supply and demand 
rests directly upon this. 

Wages, profits, interest and rent take the product. — It 
is common to consider distribution as made in the 
forms of wages for labor given without risk as to the 
product, profits to the one whose labor is associated with 
risk of loss as well as gain, interest to the one who fur- 
nishes capital in any form and waits for his compensa- 
tion, and rent to the landlord, or owner of estate, whose 
property is used for a definite time and returned. It is 
evident that any advantage received in anj r of these 



Parties in Distribution 237 

ways, at any time, must come from the actual available 
goods in store suitable for division and consumption. 
The farmer cannot pay his hired hand with his farm, 
though he may be able to do so with his products. The 
farmer himself cannot realize his profits until he has 
the proceeds of his work in the shape of consumable 
goods. So, at any particular time, the total of products 
fit for consumption makes the source from which all 
distribution must come. Debts and credits can have no 
consideration in the total, for the reason that they ex- 
actly offset each other. A general conflict of interested 
persons as to wages, profits, interest or rent comes from 
the difficulty of sharing in the actual goods at hand. 
The relation of each to the whole depends upon circum- 
stances to be discussed in future chapters. It is certain 
that the larger proportion of daily production goes to 
the mass of the people who consume their share from 
day to day. It is estimated that fully 80 per cent of 
such wealth is used up by those who contribute no use 
of capital to the productive force. It seems probable 
also that this ratio is increasing rather than dimin- 
ishing, but no statistics are sufficient to show the 
exact facts. 

Cheap standards of living. — In the natural competi- 
tion of laborers with each other, the general standard 
of living — physical, intellectual and moral — have an 
important bearing. The Chinaman in this country 
competes with the American upon a wholly different 
plane of living. His habitual needs being less, he is 
willing to work for wages that "will not tempt the native 
American. If he can do the same work, living as he 



238 Rural Wealth and Welfare 

does, he necessarily becomes a cheaper force in produc- 
tion, and the American must find a better field for his 
energies or go without employment. Under ordinary 
circumstances, the introduction of laborers able to live 
more cheaply acts upon the better class of laborers 
exactly like the introduction of labor-saving machinery. 
It first brings hardship from direct competition, but the 
cheapening of products brings enlarged demands and so 
gives new impetus to production, requiring the very 
skill which the better class of laborers alone can 
furnish . 

Thus the employment of Chinamen upon railroad 
embankments made places for native laborers as section 
bosses and engineers. The Huns and Italians that 
underbid the Irish miners in Pennsylvania have de- 
stroyed the "Molly McGuires" by making the same men 
responsible for larger enterprises. Yet the standards of 
living, which show a constant improvement, indicate a 
truer freedom of competition and a clearer recognition 
of individual wants and abilities. No one can watch 
the development of any country without realizing that 
its thrift, enterprise and progressive welfare depend 
largely upon increasing wants. Men who live best pro- 
duce most and enjoy most. 



CHAPTER XVIII 

WAGES AND PROFITS 

Wages distinguished from profits. — In discussing the 
subject of wages and profits, it is necessary to remember 
that both are compensation in different ways for actual 
exertion. If in estimating profits we sometimes include 
a return for the use of capital, it is from incomplete anal- 
ysis of the forces in use, since the interest upon capital 
can easily be separated in all actual practice, and in most 
enterprises is counted as a distinct expense to be pro- 
vided for in entering upon the undertaking. The profits 
really belong to the management of any undertaking, as 
return for the exertion in that management. In every- 
day use the term wages is applied only to the stipulated 
amount paid from time to time for services rendered to 
another. There is practically no difference between such 
payments made for service by the hour, day, week, 
month or year. If, however, the engagement for ser- 
vice is by the year, the name salary is more likely to 
be given than wages. 

Further, the term wages is most distinctly applied 
when the service is rendered as a task, and wage -earners 
when found in considerable bodies are usually called 
operatives, under the natural classification of labor ex- 
plained and illustrated in Chapter III (page 35). 

(239) 



240 , Rural Wealth and Welfare 

The services of an overseer are much more likely toj 
be permanently required, and his wages are therefore 
called a salary, estimated by the year even though pay- 
ments be made monthly or even weekly. In this case, the; 
labor is chiefly executive, taking a higher rank because of: 
the greater powers required. In this case the overseer 
is supposed to have definite plans provided for his work, , 
and to carry out those plans to the best of his ability. 

. If, in contrast with this, one's efforts are given to 
managing a business, devising the ends to be accom- 
plished as well as planning for their accomplishment, he 
is said to have entire responsibility for results and to 
receive what he can make out of the business. His exer- 
tion is chiefly speculative labor, and the returns for his 
speculation or foresight — often effort of the severest 
kind — are termed profits. Such efforts have already 
been illustrated in Chapter III, page 35. No generally 
accepted name has been given to the one who thus car- 
ries the entire responsibility of the business, but the 
word manager conveys to most people the general ideai 
involved. While it is true that a manager may some- 
times work for a salary, in general the very inventive' 
ability required for success makes the stimulant of . 
profits the most natural means of securing higher effect- 
iveness. Most managers, even of stock companies, must 
from the nature of the case be at least sharers in the j 
profits. Farmers easily distinguish between those who> 
work for stipulated wages, often called farm hands, audi 
the farmer himself, who gets the pay for all his endless - 
variety of labor, including his constant planning, in the 
shape of profits. 



Definitions 241 

Wages defined. — Hence it is fair to' define wages as a 
stipulated sura, paid at stipulated times, for stipulated 
services, measured either by the number of distinct ser- 
vices or by the time of service. A wage -earner must 
therefore be one who sells his powers, whatever they may 
be, for the use of another, bringing his own services 
rather than the products of those services to the best 
market he can find. In general, he prefers the definite 
promise of another to the indefinite chances that he may 
produce what is to be wanted in the future market. 
Very often he considers the bird in the hand worth any 
number in the bush, and is satisfied to take a certain 
living from day to day rather than risk his ability by his 
own contrivance to meet larger wants. Among the 
wage -earners we necessarily find all individuals of un- 
developed powers of body or mind, dependent upon the 
rest of the community for both tools and task; also all 
who render personal services, and most of the laborers of 
all sorts in every kind of factory. 

Profits defined. — Profits maybe defined as the in- 
lefinite returns for exertion, including all risks, which 
my manager of his own or others' industry secures by 
bringing his products into open market. In general 
:he term includes the recompense for any kind of labor, 
aowever rendered, if the uncertainty of demand and 
supply belongs to the one who renders the service. 
Thus even the fees of a lawyer or a doctor come under 
:he general principles of profits, whenever the condi- 
tions of payment in any respect depend upon success. 
[f, on the other hand, such fees are stipulated sums for 
i stated service, they fall into the rank of wages. That 



242 . Rural Wealth and Welfare 

the dividing line between wages and profits is not 
always clear is shown in comparing payment by the 
piece in manufacturing clothing, for instance, and pay- 
ment by the hour for the same kind of work. In the 
payment by the piece, the stimulant of enterprise 
borders upon the nature of profits. In payment by the 
hour, that stimulant is wanting. Yet we are likely to 
consider the difference as simply a difference in method 
of estimating wages. Two men ditching side by side 
may work, one by the day and the other by the rod. 

It is possible even to combine the two systems of 
payment so as to involve both wages and profits. Farm 
hands in England have been paid a certain price per 
month, with a share in the profits, measured by the 
number of cart-loads of grain marketed. Clerks and 
agents frequently work for stipulated wages, with an 
added percentage upon the value of sales. Most 
farmers in estimating the results of a year's labor count 
their own services, at the price of a hand, as a part of 
the cost of their products, and distinguish as profits the 
surplus of product above all expenditures. Thus a 
farmer may estimate as outgo the interest on capital 
invested, the wear and tear of machinery, the produce 
consumed upon the farm, the taxes paid to the govern- 
ment, and the wages to all who labor, including himself 
and his family. Any return from his products beyond 
enough to meet these outgoes he will consider profits. 
These will reward him for extra foresight and contriv- 
ance in management and marketing, as well as risk 
arising from possibility of failure in his plans, destruc- 
tion of his crop or stock, fluctuations in price, and un- 



Profits Illustrated 243 

certainty of collection for his sales. Such risks and 
exertions every independent worker assumes. Usually 
the exertions are impossible to the inexperienced, and 
the risks cannot he taken without accumulated capital 
or a credit established upon well-known character and 
ability. This fact naturally limits the number of com- 
petitors for profits. The effect is clearly illustrated in 
the difference between an ordinary farm hand and the 
renter of a farm. Few farmers would encourage the 
best of their farm hands to take the burden of risks 
and care implied in renting. The successful farm renter 
requires abilities and means, gained only by experience 
and accumulation. 

Wages vary ivith abilities employed. — The variation 
of wages among different classes of workmen in the 
same calling is universally recognized as dependent 
upon the powers employed. The strictly operative labor 
is usually paid by the hour, day or week, the terms vary- 
ing with the supposed strength or skill exerted. Execu- 
tive duties commanding monthly or yearly salaries vary 
with the total amount of responsibility implied, the 
large establishment requiring greater abilities than the 
small one. The strain of responsibility increases in 
some degree with the number of operative laborers em- 
ployed, and successful oversight of many hands may be 
essential to their profitable employment. In that case 
the salary of the overseer gains something of the nature 
of profits, since the manager gauges the pay by profits 
expected. If, as in great stock companies, a manager is 
hired at a stipulated salary, his personal abilities, as 
tested by accomplishment, are likely to be the sole 



244 Rural Wealth and Welfare 

gauge of wages. A successful niauager of a great en- 
terprise can scarcely be said to have a market price for 
his services, but will estimate himself in large measure 
by the profits he might secure as an independent busi- 
ness man. Within limits, such salaries will vary with 
the experience and inventive ability required. 

Supply and demand in wages. — Wages in general 
are subject as truly to the law of supply and demand as 
are ,the products of labor. If few places are vacant and 
many applicants seek those places, it is impossible to 
prevent the reduction of wages through the anxiety of 
some applicants to secure places. On the other hand, 
if few applicants seek the places open to many, each 
will find the employer most willing to give an increase 
of wages for his work. Laws cannot prevent such nat- 
ural competition, though they may hinder it. Even 
organization under secret bonds can only temporarily 
restrain. Human nature is stronger than any arbitrary 
restriction. 

In general, then, wages in any particular occupation 
may be affected directly by limited competition. Any 
necessity for peculiar abilities of body or mind, or for 
preparation by education or training, makes certain, as 
far as it goes, a limited competition, and therefore the 
opportunity for higher than ordinary wages. In the 
same way, if unavoidable hardships or dangers are in- 
volved, comparatively few workers will seek such em- 
ployment and can have larger pay. If, however, the 
dangers carry with them a stimulating excitement and 
exhibition of daring, arousing admiration for the 
worker, this may offset entirely the effect of the danger. 



Supply and Demand in Wages 245 

Soldiers and railroad employes for such reasons do not 
command pay in proportion to the dangers met. Any 
employment where there are obstacles to natural ad- 
vancement or where continuance is uncertain does not 
attract applicants except by higher wages. Illustra- 
tions of all these occasions for limited competition are 
found everywhere. 

Stimulants to competition. — If any occupation shows 
circumstances making entrance easy for new applicants, 
or if advantages for promotion are readily seen, or if it 
seems to have a special respectability with the advantage 
of social privileges, especially if it in some respects seems 
a work of philanthropy, there will be multitudes ready 
to engage, and willing to undertake the work at less 
than average compensation. It is commonly said that 
these peculiar advantages are a part of the compensation . 
They operate simply as a stimulant to competition, mak- 
ing more people willing to enter such employment at 
small wages than would be willing without these special 
advantages. 

A good illustration of such employments is found in 
common school teaching. While a teacher does need an 
expensive preparation, and success is dependent upon 
special adaptability to the work, it is nevertheless true 
that the work can be taken up readily and as readily laid 
down ; it confers upon the applicant the privilege of 
social recognition and somewhat of personal dignity; it 
gives opportunities for some note in the community, and, 
with all, it is considered a work of philanthropic charac- 
ter, entitling to the gratitude of the public. The result 
is that teachers everywhere command less of salary or 



246 Rural Wealth and Welfare 

wages in proportion to their abilities than other classes 
of wage -earners. Fortunately, this stimulant to compe- 
tition appeals largely to those characteristics of the 
individual teacher which make him more serviceable in 
his calling. The opportunity for a life of study, added 
to other considerations, makes still more effective the 
competition of earnest, philanthropic students, such as 
the world needs for teachers. 

In the lower ranks of teachers, competition is still 
more increased by the fact that common school teaching 
can be temporarily carried on in the intervals of study, 
without interfering with mental growth. Teaching is 
also specially adapted for the temporary employment of 
young men and women not quite ready to enter the 
actual life work. Acquaintance with human nature, 
which it fosters, is thought to be good preparation for 
home and business life. The employments in which 
women largely engage as wage -earners are chiefly of this 
temporary character. The fact that the life work of most 
women must be the making of the home hinders compe- 
tition in employments where long apprenticeship or 
special skill of any kind may be demanded. Any tem- 
porary employment not only appeals to her sense of 
capacity for earning wages, but seems better adapted to 
her future. If that employment at the same time affords 
opportunity for social life and calls for the natural 
adornments of youth, the young woman considers wages 
only a small part of the general consideration, and is 
satisfied with a bare living. Hence clerkships in stores, 
subordinate positions as teachers and places as type- 
writers are crowded with applicants at wages insufficient 






Competition in Laoor 247 

for a life-time support. Employment in domestic ser- 
vice, which might be supposed more consistent with the 
larger work of life, is rendered less attractive by the 
almost entire absence of social privileges and natural 
opportunities for advancement in knowledge of the world. 
Girls who would prefer house work, with equal social 
freedom and the natural stimulant of contact with other 
young people, compete for lower wages in less satisfactory 
employment during the years of their girlhood. This is 
less noticeable in country life, where girls in domestic 
service become a part of the household and share in the 
privileges of the young people at home. 

Another illustration of the depressing effect upon 
wages of excessive competition is found in the work of 
women upon cheap clothing. This work is usually done 
by the piece in the home, and can be taken up at inter- 
vals between household duties. Many women consider 
earnings of this kind a mere addition of spending money 
to a somewhat meager support in their home life. Ic can 
be carried on without displa}^, and so preserves the dignity 
of persons who would otherwise shrink from wage earn- 
ing. The result is a very serious competition, reducing 
wages below even enough to sustain life and character. 

These are only illustrations of what happens in every 
calling when circumstances stimulate excessive competi- 
tion. Relief can come only from larger range of satis- 
factory employment and a clearer distinction in favor of 
genuine wage -earners and genuine employers among the 
mass of the people. The customs of society have a 
much stronger influence upon the life of women in 
steady employments than upon that of men. A thor- 



248 Rural Wealth and Welfare ' 

oughly enlightened community can do much to enlarge 
the sphere of such women as are naturally wage -earners, 
by proper encouragement of their enterprise. 

Fluctuation of wages.. — Wages in every employment 
are just as naturally subject to fluctuation under the law 
of supply and demand as are prices of commodities. 
Whatever operates to increase the number seeking em- 
ployment, or to diminish the amount of employment 
open to competition, reduces the wages. Whatever in- 
creases the opportunity for employment, or diminishes 
the number of persons seeking employment, increases ; 
the wages. This is well illustrated in the cost of harvest ; 
hands in a year of large crops as compared with a year 
of small crops. Any financial disturbance, checking the \ 
building of railroads and other great enterprises, brings 
multitudes of would-be farm hands to compete with 
those who naturally follow farming. On the other hand, 
the introduction of factories or mining industries has 
sometimes affected directly the wages of farm hands 
through a large region by lessening competition. 

Upward tendency of wages. — It is certain that the 
general tendency of wages in all employments is upward 
rather than downward, in spite of serious disturbances 
from financial depression often repeated The gradual 
increase of welfare among wage -earners is greater even 
than the increase in money wages. Those who are in- 
clined to join in the cry that the former times were 
better than these can be answered as they were in Solo- 
mon's time, " Thou dost not inquire wisely concerning 
this." No doubt the transition from small workshops to 
large ones and from small factories to great combina- 



Tendency of Wages 249 

tions has caused friction in adjustment to the new con- 
ditions. Many are now wage -earners who were once 
profit -gamers. But with the improvements in associa- 
tion and a clearer understanding of abilities and needs, 
each worker becomes a stronger factor than ever before 
in bringing about a fair competition and a satisfactory 
compensation. 

There are still new difficulties in every change of 
method. The influence of custom often retards freedom 
of movement, makes more slow the natural rise of 
wages, and hinders a gradual adjustment to new condi- 
tions. In many cases it prevents individual enterprise 
among wage -earners, and crowds from the higher ranks 
into competition with the lower because of no natural 
outlet for ambition. Even laws intended to protect 
laborers sometimes operate against them. Thus a law 
restricting the terms of contract between workmen and 
their employer has sometimes prevented the employer 
from investing capital in a business which otherwise 
would have increased the opportunity for labor, and so 
would have actually increased wages. 

The effect of free schools upon ability to earn is gen- 
erally recognized. The best estimates place the increase 
resulting from common school education at fully 25 per 
cent. Some of the best establishments are limiting their 
offers of employment to young people who have had the 
advantage of even high school training. This more 
[general education tends in two ways to increase the 
compensation of wage -earners : first, by giving a 
clear knowledge of abilities that makes competition 
fairer; and second, by increasing the general effective- 



250 • Rural Wealth and Welfare 

ness of all production, which enlarges the sum to be 
divided. 

Every movement toward greater social freedom and I 
uniformity of opportunity contributes to the same end.. 
Next to slavery, social caste is the chief obstacle to free: 
and fair competition of laborers. Any barriers of race,, 
social organizations, or even churches, which cultivate 
exclusiveness in any direction, in the end work hard- 
ship. If they bring temporary advantage to a few, they 
are sure to hamper the freedom of many. The welfare 
of the community is surest when social conditions favor 
the freest communication in all ranges of employment, , 
whether in wage -earning or in profit -making. 

The cheapening of transportation in recent years,, 
bringing all the world nearer, has had various effects 
upon wages. It has destroyed, to a considerable ex- 
tent, the inequality of wages between different regions 
of country. If laborers of any kind are scarce, a tele- 
gram will within a few hours bring numbers from some 
place where they are too plenty. The result is a ten- 
dency to greater uniformity throughout the world. As 
yet the full effects of this progress are not realized. 
Some hardships will undoubtedly be endured from the 
ready introduction of unskilled laborers from crowded 
countries into our less densely peopled country. But 
with a larger range of production opened by cheap* 
labor, our better workmen will find more constant and 
more remunerative employment. If restrictions upon 
immigration are necessary, it must be to prevent too 
sudden a transition, hindering adjustment to new con- 
ditions. The danger of overcrowded population comes > 



Tendency of Wages 251 

more certainly to the nation excluding itself from the 
great world by excluding the rest of the world from 
itself. 

The general effect of improved machinery has been 
several times referred to already. Its advantages come 
to the wage -earner directly in multiplying employments 
and in multiplying the demand by cheapening products. 
Indirectly, the benefits are still greater, because these 
cheaper products form the bulk of living for the 
workers. It is probable that even the better living thus 
provided has raised the efficiency of labor so as to com- 
mand better wages. It is certain that every movement 
of civilization which gives a clearer knowledge of hu- 
man nature and the world about us adds to the power 
of every man, whatever his work. We may welcome 
every element of progress in this enlightenment as a 
direct help to the portion of humanity recognized as 
wage- earners. The better the masses of people under- 
stand each other the better each understands himself; 
and that understanding is the best protection against 
oppression of circumstances or of men. 

Variation in profits. — Profits in various pursuits, 
[ike wages, are affected by limited competition. The 
need of special abilities and experience in any particu- 
lar undertaking keeps back the timid from that enter- 
prise, and the accumulation of experience of a pe- 
culiar kind hinders one from turning to other occu- 
pations. Even if a young man is willing to take the 
dsk of inexperience as a manager, he can seldom gain 
ihe confidence of those who control capital. Hence 
competition in new and untried enterprises is slight, and 



252 • Rural Wealth and Welfare 

profits are often great. Other undertakings are of sucl 
a nature as to involve great uncertainty. The risk oj 
failure retards the cautious, and so the most enterprise 
ing win great returns. In estimating such returns, wc 
overlook the failures and count only the great successes-; 
Sometimes accidental opportunities open to the few 1 
limited range of enormous profits. Legislation fostering 
monopoly sometimes favors such opportunities. These* 
are usually temporary, and such advantage cannot lon|i 
he maintained under the most fortunate conditions -1 
Secret methods have sometimes controlled the marken 
for individuals with enormous gain, and in a few in| 
stances a nation has maintained such secrecy with apf 
parent success. But these, too, quickly yield before 
competing enterprise, since wage -earners under sucl 
employers must share to some extent the secret, anci 
will have the stimulant of enormous profits to use the 
secret for themselves. 

Profits in competition. — Profits are themselves i 
stimulant to competition, and competition in every pur* 
suit tends to reduce the profits. If any circumstance 
apparently insures more than average profits in any 
undertaking, competition becomes excessive and profits; 
vanish. The promise of a tariff on wool leads farmers 
to expect an advance in the profits of sheep raisings 
Competition begins in the purchase of flocks, by which 
the profits of those already in the business are greatly 
increased. Competition continues by multiplication ir 
the flocks until sellers of sheep are more plenty thai 
buyers. Thus, the stimulant to competition has oper< 
ated to lessen profits in the end. A famous sheer 



Profits in Competition 253 

•aiser in New York, when asked to give a maxim for 
uccess in the business, answered, "Buy when your 
Leighbors sell, and sell when your neighbors buy." 

Similar experience has been noted in various pur- 
uits. The tendency, however, with wider knowledge 
>f others' wants and efforts is toward a greater uni- 
ormity of profits. Modern methods of production and 
learer perception of ways and means make it easier for 
ompetition to have its full effect between different 
:inds of business, as well as in the same business. The 
ttore we know of our neighbor's work through the daily 
►ress and extensive travel, the fairer is the opportunity 
or competition to act. This tendency brings hardship 
o the weaker portion of managers engaged in any par- 
icular business. This makes the power of so-called 
rusts and great combinations apparently harmful. In 
he end, however, the result is more constant profits, 
hough smaller, and the advantage of the whole com- 
munity in a more stable business. It is even conceiva- 
ble that the stimulant of fair profits may finally reach a 
arger proportion of the community through interest in 
he great establishments than in the past from the un- 
qual and uncertain returns of independent managers. 
i Even among professional men, whose fees for services 
ave somewhat the nature of profits, the same law of 
ompetition, dependent upon supply and demand, holds 
way. The compensation of an author for his publica- 
tions, though protected by copyright, is dependent upon 
onditions limiting competition or stimulating it. It is 
ustomary for surgeons, physicians and dentists to make 
fee proportional to the demand for their services. 



254 • Rural Wealth and Welfare 

Thus the skilled dentist, who is wanted by ten times as; 
many people as he can serve, raises his price till the de-s 
mand is limited to meet his strength. This enables; 
younger men at smaller prices to gain the opportunity to 
establish like reputations by doing equally good work. 

Profits in agriculture. — The profits in agriculture are 
subject to the same laws. Many influences operate in 
both directions. The limitation of land fit for agrieul-j 
tural purposes has a tendency in itself to increase the 
profits of land -holders, under the principle of monopoly, 
though its chief effect is on land values. The increasing 
wealth of the world, and the greatly increased wants of 
the civilized community, multiplying manufactures, limit 
competitors more and more. The relative number o\ 
farmers in our country is gradually diminishing, while 
the demand for food is actually increasing beyond the 
increase in population. Men are predicting every yean 
a scarcity price for wheat, — unwisely, probably, — 
through the limited range of possibilities in wheat rais- 
ing. The introduction of labor-saving machinery en- 
ables enterprising farmers to greatly increase theiri 
product for the same number of acres, and still further; 
to increase the range of management so as to makei 
larger farms a possibility. The rapid advance of means? 
of transportation has so widened the range of competi- 
tion as to make the farmer in one part of the world: 
compete with the farmers of every other part. The; 
staple products, especially wheat, being so easily adapted 
to new countries, are constantly liable to over-produc- 
tion. At the same time the effects of a bad season in 
any particular region, while reducing the crop, are noti 



Profits in Agriculture 255 

likely to advance the price to the same extent as for- 
merly. The opening of vast regions once considered 
deserts to a rapid settlement by farmers for the sake of 
the profits in land speculation has again and again 
wrought changes in the entire business of agriculture. 
Similar effects may be expected still with the develop- 
ment of South America, South Africa and Siberia. 

All these facts tend now to make the profits in agri- 
culture decline, and the fact that farm life has certain 
attractions in establishing permanent homes for families 
and life- time associations, contributes to this tendency 
by holding people to their place as farmers for at least a 
generation. The possibility of independent enterprise, 
even with small profit, and the freedom of family life 
from interference of neighbors make large numbers of 
farmers willing to continue their business in spite of the 
reduced earnings. 

Fluctuation in profits. — It is proper to call attention 
bo the rapid effects of any change in market upon the 
Drofits of any enterprise. Wages are in large measure an 
anticipation of profits, and so far as they are affected by 
3hanges in market prices, it is largely through estimates 
upon averages. Custom has much to do with wages de- 
manded and paid, but profits are fluctuating constantly 
with the fluctuation of prices, with every change of 
methods affecting competition, with every introduction 
Df improved machinery and with every accident of 
fortune. 

No better illustration of this fact can be given than 
s familiar to every farmer in comparison of results from 
ihe work of different seasons. With the same outgo for 



256 • Rural Wealth and Welfare 

labor lie may find the profits of two successive years wide ! 
apart. One year has granted the fortune of good crops? 
with fair prices, while the other has yielded him a half : 
crop when the prices of his product in the world are low. . 
Possibly the improved machinery in wheat raising, ap- 
plicable to the great farms of Minnesota, Dakota and 
California, has caused him to bring a costly product into 
close competition with a cheap one. Possibly, too, he 
has been tempted to excessive use of labor-saving ma- 
chinery himself at too great cost for the transition, and! 
it is more than probable that, stimulated by the highi 
price of oats last year, he, with thousands of his neigh- 
bors, has made an extra crop of oats this year, to the 
actual destruction of the market. In all these cases the 
farmer himself suffers directly, while his hired hand is 
affected only indirectly by the unwillingness of farmers- 
in some seasons to employ as much labor. 

Profits offset by losses. — The actual profits in any en- 
terprise are often overestimated by our failing to notice 
that all the waste of unthrifty undertakings comes prac- 
tically out of the profits of the more thrifty. Wage-- 
earners as a class are protected against losses by frequent 
settlements and by public sentiment. The losses of the 
unthrifty managers come out of the accumulations of 
previous thrift, or else are borne by the thrifty men who 
have trusted them. The bulk of bad debts in failure of 1 
any enterprise is for materials, machinery, etc., fur-- 
nished by other producers. In great financial depression, 
the profit -makers bear the evil directly, while the wage-- 
earners feel the effects in the lessened competition for 
their service. 



CHAPTER XIX 

CONFLICT BETWEEN WAGE-EARNERS AND 
PROFIT - MAKERS 

The nature of the conflict. — The mutual interest of all 
whose energies are used in production, that the total 
product of wealth should be as great as possible, is often 
disturbed by doubt as to the fair division of what is pro- 
duced. Under the modern factory system, the multitude 
sustain the relation of employes to a comparatively few 
employers. Antipathies are liable at any time to arise 
between these two classes of workers. Those who offi- 
cially control wealth in great enterprises are subject to 
suspicion of unfair treatment of their less independent 
employes. Ignorance among the mass of laborers of the 
intricacies of business life contributes to such suspicion. 
In fact, the so-called conflict of capital and labor is a 
struggle for and against profits. Interest and rent are 
only indirectly involved in the question. The manager's 
profits may be assumed by both manager and wage- 
earners to arise from reduction of wages. The neces- 
sary reticence of business managers and the frequent 
arbitrary decisions as to wages help the wage -earner to 
feel that his interests conflict with those of his 
employer. 

It is well for all to realize that this conflict, when 

Q (257) 



258 • Rural Wealth and Welfare 

there is one, is not so mnch between the rich and the 
poor as between the straggler for profits and the strag- 
gler for wages. In many instances the true solution lies 
in the same direction, if both could see the facts alike. 
It is an acknowledged fact that generous wages make 
enlightened, energetic laborers, and that greater profits 
come in the long series of undertakings from the most 
intelligent service. A farm-hand at $20 a month is 
sometimes worth more than two at $15. On the other 
hand, if markets are low and profits decline, permanence 
of employment will depend upon a readiness of wage- 
earners to accept a new adjustment of wages to condi- 
tions. Everything which fosters a better understanding 
between profit -makers and wage -earners contributes to 
the welfare of both. Everything which hinders such 
understanding injures the welfare of both. The cost of 
such friction is borne by both parties. But in the long 
run, the wage -earners are liable to carry the larger part. 
Even the destruction of property by rust, decay, or even 
violence, comes back upon the wage -earners who might 
have been employed in its use, quite as truly as upon the 
manager whose profits and accumulations are wasted. 

Obstacles to fair understanding. — The necessary ills 
connected with advancing civilization, in the laying aside 
of old methods for new, in the adoption of extensive 
machinery, and in the more perfect competition with the 
world, fall upon both profit -maker and wage -earner. 
The wage -earner feels the immediate loss of his usual 
opportunities. The profit -maker feels the weight of 
providing new machinery, devising new methods and 
taking the longer range of chances. All these ills are 



Obstacles to Agreement 259 

met in time by intelligent and hopeful struggles for the 
best. In the worst conditions ever brought by improved 
machinery, a very few years have brought relief and im- 
provement to the very class of laborers injured. 

The danger is that wholesome competition upon a 
clear basis of fair understanding and free range of en- 
terprise may be checked by legislation or organization 
for class purposes. Against the interests of the mass of 
the people are all extended franchises, giving arbitrary 
control for long periods of years over any industry ; mo- 
nopolies sustained by patent rights or protective duties; 
trusts, so far as they imply a combination of men to 
resist the law of supply and demand ; and laws which in 
any way favor one class of people engaged in one kind 
of industry as opposed to any or every other. 

Quite as prominent are those hindrances which come 
from, every kind of fraud, including adulteration and 
misrepresentation of products, deception as to market 
conditions, false credit, and violence of every kind. The 
more perfect the light thrown upon all the conditions of 
production, the better the understanding which all men 
may have of a neighbor's welfare, and the easier it is to 
put ourselves in our neighbor's place. 

Strikes. — The methods of warfare between wage- 
earners and profit -makers are quite generally understood 
under the names of strikes, boycotts and lockouts. The 
occasion for a strike, which means a sudden stopping of 
work by the employes of an establishment, is usually 
some question of immediate advantage to the workmen. 
A desire for increased wages, fewer or different hours of 
Jabor, or the removal of some restriction upon habits or 






260 . Rural Wealth and Welfare 

associations, gradually becomes general, and through 
some permanent or temporary organization united action 
is taken. Quite frequently a strike is occasioned by a 
sudden and apparently arbitrary reduction of wages, 
affecting a large body of men. Many strikes are inaugu- 
rated in the interests of discharged workmen, when the 
organization to which they belong is supposed to be in- 
terested. 

Thus a strike is always a form of warfare, and should 
be entered upon only after the same careful consideration 
that makes war sometimes a necessity. Under ordinary ( 
circumstances and upon general principles, no body of 
workmen has any more right to suddenly stop work 
without notice than railway managers have to stop a 
daily milk train. The end to be secured must be im- 
portant enough to humanity to overbalance the injury of 
the strike itself. 

Since a strike is an effort to produce a corner in the 
labor market, it will succeed in the end sought only when 
conditions 'for cornering the market are favorable. Even 
then the loss to the entire community is considerable. 
The injury to property, while directly borne by the 
profit -makers, is widely distributed. First, all wages 
stop and wage -earners suffer. Second, ability to pay 
debts ceases and capital owners suffer. Third, insur- 
ance companies have their risks increased and all in- 
surers suffer. Fourth, the market for the products is de- 
moralized and all consumers suffer. Fifth, almost always 
social disorder results, police expenses are greatly in- 
creased, and all taxpayers suffer. Sixth, in the end the 
relation between employers and employed is more 



Effects of Strikes 261 

strained and less free than before, so that all humanity 
suffers. 

The chances of success, as indicated by the record 
of many years, are small, and apparent successes are 
often temporary. And yet the world recognizes the 
right of a body of laborers to strike, just as it recog- 
nizes the right of revolution to secure the general wel- 
fare. Formerly a combination of workmen in a strike 
was treated as a conspiracy and punished as such. Now 
the general rule is absolute freedom of combination 
with rigorous repression of fraud and violence. This 
enables any body of men to make a serious test of the 
conditions of a labor market, at the risk, primarily, of 
their own welfare, but with serious strain upon the 
general good. It leaves room for the possible breaking 
down of old customs, which are stronger than law, and 
it sometimes proves, like a war for liberty, a means of 
great enlightenment to those who take part in it. It is 
properly held as the last resort in the struggle for fair 
recognition of the rights and necessities of wage- 
earners. 

It is noticeable that the tendency to strikes among 
the more skilled workmen is diminishing, and that the 
mass of communities are weighing their own interests 
more carefully as they see the general destructiveness of 
the method. At present strikes are expected among 
laborers of least skill, where they are, from usual con- 
ditions, least effective. Strikes are frequent among 
coal miners, where wages are liable to reach the lowest 
possible mark because of the ease of competition from 
all parts of the world, though the effect of such strikes 



262 • Rural Wealth and Welfare 

in bettering the condition of miners has scarcely been 
felt. The fact that destruction of property and the 
natural waste from strikes is so widely distributed 
among workmen and consumers retards popular sym- 
pathy, and the fact that strikes increase the risk of 
capital employed, and actually reduce the amount of 
capital in use, diminishes the chance of increasing wages 
or comfort in those employments where they are likely 
to occur. It seems evident that some better remed}^ for 
oppressive conditions of wage -earners must take the 
place of strikes. 

The boycott. — The boycott is a comparatively recent 
device for enlarging the field of combat to include not 
only the employes of an establishment but the con- 
sumers of its products. This is especially applicable to 
those industries the products of which are largely con- 
sumed by wage -earners, whose sympathies can be de- 
pended upon to carry it out. It asks all sympathizers 
to refuse to purchase products from the employer or 
firm attacked. A great bakery, for instance, can easily 
be ruined by a boycott, if its customers are chiefly 
wage -earners. It is easily applied in cases where cus- 
tom has allowed the use of a label from some organi- 
zation of workers. It has been attempted with some 
success against a railroad so related to other roads as to 
require the services of sympathizers with its striking 
employes to carry its freight to final destination. An 
instance of its widest application is in an effort to per- 
suade the people of a city to refuse to patronize the 
street -car system. 

The warlike nature of this method is apparent in 



The Boycott 263 

the effort to use terror as one means of persuasion. In 
this ease it uniformly overreaches itself in destroying" 
public sympathy with the strikers. That it has a pos- 
sible place in the struggle of wage -earners for their 
rights cannot be disputed, since it corresponds with the 
nature of a blockade or a siege in other warfare. But 
its nature as a method of warfare is equally clear, and 
its use in the interests of humanity belongs, with all 
war, as a last resort. 

The lockout. — Lockout is a name given to a method 
employed by managers to prevent the continuance of a 
strike by aid of the sympathy of employes not directly 
interested. It often happens that a comparatively 
small body of workmen in a great factory strike for 
higher wages, and are sustained in their strike by the 
sympathy and support of other workmen in the same 
factory. Under these conditions the employer is 
tempted to stop all work by a sudden closing of all 
shops, that the pressure of suffering among a large 
body of wage - earners may force the smaller body to 
accept the old conditions. The lockout seldom gains a 
popular sympathy, for the reason that employers appear 
to be using this method of warfare from a superior po- 
sition of power. And yet no one can dispute the gen- 
eral right of employers to control of their business. 
Such a sudden stopping of business without an attack 
by a strike or some similar provocation would be con- 
sidered inhuman, and popular sympathy would be 
wholly with the laborers and consumers interested. 

General evils of such conflicts. — The incidental 
effects of such violent opposition between profit -makers 



264 . Rural Wealth and Welfare 

and wage -earners are certainly detrimental to all in- 
terests. The great multitude of farmers throughout 
the country depend for welfare upon the body of peo- 
ple using farm products, and all the waste of power 
from enforced idleness of wage -earners, managers and 
machinery is shared by farmers through diminished 
power of the rest of the world as consumers. In only 
a few instances have strikes affected agriculture direct^, 
partly because the relations of employer and employed 
are so largely personal; partly because the supply of 
agricultural laborers for the season is usually large ; but 
chiefly because wage -earners upon farms in this country 
expect eventually to become themselves proprietors, and 
so no separate organization is probable. In some coun- 
tries, however, where wage -earners in farming com- 
munities are a class by themselves, a strike has been the 
only method by which the barrier of custom and law, 
built up through many generations, could be broken. 
The great agricultural strike in England will always 
be remembered as having elevated the standard of labor 
and living in that country. It is to the interest of all 
farmers to cultivate a better understanding between 
emploj^ers and employed than can be maintained with 
any general expectation of strikes, boycotts, lockouts 
or similar warlike methods of settling fair wages. 

Trades 1 unions. — The organizations known as trades' 
unions, in which the wage -earners in any particular 
kind of business unite for self -protection, have had a 
gradually widening influence upon the relation of mana- 
gers to employes. Once they were characterized as 
"machinery by which 10 per cent of the working classes 






Trades 1 Unions 265 

combine to rob 90 per cent," because the advantage 
secured usually comes out of the consumers of products. 
But today reasonable doubts of the general advantage 
of a well -managed trades' union have disappeared. If 
once they seemed a conspiracy against society in gen- 
eral, they are now recognized as a part of the general 
progress in mutual recognition of rights and privileges. 
It seems right to expect from them still larger useful- 
ness, with a clearer perception of their importance. It 
is evident that they contribute somewhat to general 
intelligence of their members, and so far as this is true 
they help toward greater efficiency. At the same time 
they help to maintain stability of employment and sta- 
bility of other conditions surrounding labor. 

A brief enumeration of ends they may serve directly 
will help to appreciate their importance. First, they 
can as truly estimate the market value of wages by 
gathering statistics from all parts of the country and 
from other countries as can any organization in com- 
merce estimate the market value of produce. Second, 
they can serve as an employment bureau in furnishing 
information of places where work is wanted, thus equal- 
izing the advantages as well as the burdens of their 
associates. Third, they can make more uniform and 
more satisfactory the customs in regard to the length of 
a day's work or privileges of any kind associated with 
the work as perquisites. Fourth, they can, if they will, 
find the true gradation of skill and of wages among 
workmen, so as to establish a natural line of advance- 
ment. Fifth, they rightly do, and can still further, 
serve for mutual support in cases of illness, and for pro- 



266 Rural Wealth and Welfare 

tection of a community against fraud in pleas of pov- 
erty. Sixth, they may easily and properly, if they will, 
provide for insurance of character, both as men and as 
workmen, by issuing certificates, and under proper pro- 
vision giving bonds, such as are required in many posi- 
tions of trust. Seventh, they may extend their opera- 
tions even to the taking of jobs that require a variety 
of work continuing through a period of time. Eighth, 
they can, under most favorable circumstances, under- 
take various stock enterprises, especially cooperative 
stores, thus securing an incentive to saving, and diminl 
ishing the spirit of antagonism against the profit- 
makers. Finally, though they have the best possible 
organization for a successful strike, if necessary, they 
can subordinate this disposition toward warfare to a 
broader machinery for fair consideration of all interests 
and for individual arbitration of rights. 

Such organizations, under good management, win 
the respect of all, and find a recognition of their 
methods satisfactory, Farmers' clubs and granges,, 
though far from reaching ideal efficiency, furnish sug- 
gestions of the general utility. Unfortunately, these 
organizations, having little if any basis of capital, have 
seldom been incorporated under the laws of the state. 
Could the powers and purposes of such organizations 
be established upon a basis of statute law, the range of 
their usefulness might be greatly increased. They 
might even sustain a method for enforcing in the courts 
the collection of wages, where the single wage -earner 
often accepts the half loaf in a compromise rather than 
meet the expense and loss of time involved in a law suit. 



Trades' Unions 267 

Certainly the establishment of legal relations between 
the trades' union and the state would give to it a char- 
acter and stability most likely to promote all interests. 

Federations of labor. — The so-called federations of 
labor, in which practically the only bond of union be- 
tween individuals is the fact that all are wage -earners, 
have so far worked out but a small part of the problem 
involved in their existence. They have the advantage 
of uniting large numbers and a variety of interests; 
but they have the disadvantage of subordinating all 
other interests to the supposed conflict between em- 
ployers and employed. Their tendency is almost cer- 
tain toward lowering standards of efficiency, and 
attempting by class legislation to get the advantage of 
mere numbers. 

It is almost impossible that the organization shall 
be kept out of the field of bargains in politics and con- 
trivance for special legislation, demoralizing to the 
whole country. Too often the votes of members are 
made a bribe for securing certain favors. In the nature 
of the case, they sustain a body of officers whose chief 
business is in danger of becoming that of either po- 
litical agitators or political bosses. The machinery of 
organization is liable to reduce the independence of in- 
dividuals. The organization itself is liable to demand 
a personal subordination almost equivalent to military 
rule, and the badge of the society may mark a man as 
under direction of authority. Even in questions where 
the majority rule, the force of the federation requires 
the caucus principle of absolute adherence, even though 
the majority represents the weakest and least intelligent 



268 . Rural Wealth and Welfare 

part of the organization. The demoralizing effect of 
such methods, including wholesale trading of opinions,; 
is liable to debase citizenship, and so to diminish thd 
individual self-respect, which is the highest possible 
protection for laborers. 

Courts of arbitration. — Arbitration between em- 
ployers and employed, in cases of serious misunder- 
standing, has long been advocated as a wise means of 
settling differences. The obstacles to its general, volum 
tary adoption are considerable. Employers object be j 
cause it involves the admission of an outsider as u< 
judge of their business methods. The employes object 
because they fear the sympathy of arbitrators with the 
superior intelligence, wealth and power of employers, 
Yet there seems no good reason why a representative 
body of men, chosen for character and ability, should 
not be appealed to by both parties in a contest which 
has already broken up the natural relations of business, 
As has been shown, the whole community suffers ir 
every interruption of production and trade, and so fai 
the community has the right, and should have the legai 
privilege, of insisting upon the fairest and quickest 
means of settling the controversy. In far less im- 
portant difficulties between individuals, society insists: 
that either individual shall have the right to bring the 
other into court. 

Society is waiting only to settle the best form of 
court of arbitration for labor difficulties. The trend oi 
popular judgment is in favor of a well- organized conn 
mission, having the dignity if not the authority of Si 
supreme court. That such commissions have not gen' 



Courts of Arbitration 269 

erally come up to the ideal is due largely to political 
influence among leaders of organizations, so that the 
commissioners become the choice of a faction rather than 
of the people. It is conceivable that the functions of 
judges in a series of state courts may be so enlarged 
under carefully framed laws as to include the duty of 
arbitration in labor contests. 

If the people are not yet ready for compulsory set- 
tlement of such questions, the time is surely coming, 
under the enormous aggregation of industries and the 
'.mmense combination of employes, v/hen the judgment 
of the people expressed in. due form of law will control 
both employer and employe. The whole world is recog- 
nizing methods of arbitration as better than warfare. 
It will soon insist that these minor wars within the 
3ommon wealth shall cease. 

Profit-sharing. — Some general system of prevent- 
ing antipathy between profit -makers and wage -earners 
seems desirable. Certain interests are known to be 
mutual, and both employers and employed welcome any 
system by which those mutual interests can further the 
success of the business. Among the methods proposed, 
and sometimes successfully employed, the most promi- 
nent is profit-sharing. This implies on the part of 
3mployers after payment of current wages a distribu- 
tion, at stated times, far enough apart to secure a fair 
average in the profit and loss account, of some portion 
of net profits among all the wage -earners. The per 
3ent of net profits to be thus distributed is matter of 
agreement, and the basis of distribution is naturally the 
scale of wages accepted by the employes in their con- 



270 Rural Wealth and Welfare 

tract for employment. The particular methods of apply- 
ing these principles vary with circumstances, but in all 
cases depend upon the actual confidence of employes 
in their employers. The effects seem to be good, bad 
or indifferent, in proportion to the general intelligence 
and stability of the employes. With really skilled 
workmen, established in homes and feeling responsi- 
bility as citizens, profit-sharing stimulates to the high- 
est energy. With weak and irresponsible wage -earners 
it is likely to bring waste and sometimes false notions 
in regard to wealth production. 

The weakness of the whole system is the lack of 
provision for fairly sharing burdens in the constantly 
recurring periods of loss. If the employe's share of the 
profits is consumed upon comfort or luxury, he is even 
less prepared than without such profits to meet the loss 
of not only profits, but his wages, in times of depres- 
sion. If these additional earnings shared as profits 
become an insurance to the wage -earner, a sort of re- 
serve for sustenance and safety in the necessary times of 
weakness in any industry, they stimulate the best char- 
acteristics of saving and character -building, and culti- 
vate a disposition to meet all emergencies in patience. 
It is quite customary, therefore, in any system of profit- 
sharing to provide also an investment for the employes 
in a reserve fund, from which the necessities of the 
business and the needs of the whole community of 
workers may be met. Such a method, if wisely man- 
aged, makes the interests of the employes coincide with 
those of the employer. If added to this there is ample 
opportunity for suggestions as to enlargement and im- 



Profit Sharing 271 

provement of the business in all minutiae, the best abili- 
ties of the workmen are called out and the heartiest 
sympathy is possible. There still remains against such 
a system the objections, that losses are not shared as 
truly as profits, and that employes are liable to require 
too intimate an acquaintance with the condition of their 
employer's business to foster the success of the enter- 
prise. Its successful application is so far confined to 
lines of business easily comprehended and direct in 
their methods. 

Sliding scales of wages. — Another device for con- 
necting directly with the fluctuations of business any 
compensation of wage -earners is called the sliding scale 
of wages. This is an attempt to make each sharer in 
production depend directly upon the price of products 
in the market for rate of wages. The wages of differ- 
ent workers are adjusted to each other by contract upon 
some ratio established by experience, and then the wages 
of each are made to vary from month to month with 
the average price of the finished product in the general 
market. This subjects all parties directly to the fluctua- 
tions of the business in both profit and loss. Its suc- 
cess is dependent upon the confidence placed by em- 
ployes in the fairness of the adjustment. It stimulates 
Ito highest productiveness when prices are high, and 
checks production slightly when prices are low. But 
it provides no direct method for readjusting business 
under the pressure of great changes in methods of man- 
agement, nor does it save from strong antipathy against 
the improvement of a business by labor-saving ma- 
chinery. Its successful employment depends in general 



272 Rural Wealth and Welfare 

upon the character and efficiency of employers and the: 
general intelligence and enterprise of employes. 

Cooperative industry. — Cooperative industries are: 
sometimes advocated as a complete solution of labor 
difficulties. The system implies a union of independent 
workmen, all of whom shall be sharers in the capital! 
employed as well as in the labor involved, including 
management. The management of the enterprise 
is entrusted to chosen members of the cooperative 
force, and wages or salaries are fixed according to | 
abilities employed, essentially upon the scale of current , 
wages outside the cooperative enterprise. All profits are 
then shared among all members of the association in 
proportion to their wages. But an investment of such 
profits in the growth of the business is an essential part 
of the plan. 

This method satisfies the ideal of equity in division 
of wealth produced, provided the basis of adjustment 
between classes of wage -earners is accepted as fair. The 
principal difficulty in this respect arises in reference to 
the salary of managers and overseers. Such salaries are 
less clearly defined in the labor market, being usually 
complicated with profit -making, and are liable to be 
considered out of all proportion with the wages of other 
workers. If underestimated, the marked abilities re- 
quired in management are likely to be withdrawn from 
the enterprise for independent management in profit- 
making. 

The chief difficulties, however, with cooperative pro- 
duction grow from the want of confidence of the multi- 
tude of shareholders in their managers. Few kinds of 



Cooperative Industries 273 

business can be carried on successfully under a body of 
absolute rules, and fewer still will bear the delays and 
hesitation required for a general consultation of many 
authorities. The comparatively few instances of gen- 
uine success in cooperative production are due, in the 
first }3lace, to the comparative simplicity of the under- 
taking ; and, in the second place, to the genius of some 
organizer, who has been willing to contribute his su- 
perior abilities for the sake of the enterprise itself rather 
than the compensation. 

A few principles may be fairly drawn from the gen- 
eral experience. First, all shareholders must be actual 
workers, in some way responsible for a part of the pro- 
duction. Second, the influence of each shareholder 
must in some way be held in direct ratio to his share in 
the production. Third, the system of accounts must be 
such as all can fairly understand. Fourth, the manage- 
ment must be entrusted to a chosen few, whose interests 
are chiefly in the business itself, whose character secures 
the confidence of all, and whose administrative ability is 
not too much hampered by ru4es. 

The opportunity for cooperative industry is nowhere 
greater than in a community of farmers. Butter and 
cheese factories, cold storage plants and milk stations 
invite the cooperation of interested farmers upon the 
simplest possible basis of agreement. The multiplica- 
jtion of such enterprises is desirable, and the farmers 
of every community may profitably study the condi- 
tions of success. The greatest obstacle heretofore, 
has been the want of competent management, and the 
distrust aroused and maintained by the inefficiency 

R 



274 Rural Wealth and Welfare 

and fraud of managers. It is possible, too, that farm- 
ers generally do not recognize the actual importance of 
executive abilities, and are unwilling to pay the salary 
actually earned by a thoroughly competent man. 

Legal restrictions as to labor. — It is natural for those 
who suffer in the struggle for better wages to seek the 
support of law in restrictions upon contracts as to wages, 
hours of employment and conditions of comfort. The 
principle that governments must protect the weak 
against the strong in any community is a thoroughly 
established one. Yet its applications are subject to con-, 
tinual readjustment. Multitudes of experiments have 
been tried, affecting the whole range of inequalities in 
wages and perquisites. In many instances, wages have 
been fixed by law, and that for long periods of time, but 
without relieving in any respect the actual force of com- 
petition among wage -earners themselves. Indeed, the 
tendency of very explicit enactments is to weaken the 
individual ability of wage -earners by destroying ambi- 
tion. Wages fixed by law are necessarily as low as the 
average would be in a free competition • otherwise pro- 
duction is hindered and capital is diminished. With this 
low average any worker of more than average ability 
gains nothing by exerting his ability, but does gain ease 
by neglect. Thus enforced uniformity reduces the 
energy of the producing forces and practically closes the 
doors of advancement from wage -earning to profit- 
making. 

A similar effect is found in efforts to regulate the 
hours of labor by law, except where the law simply de- 
fines the meaning of a day's work or emphasizes the im- 



Restrictions for Labor 275 

portance of public health and vitality rather than equality 
in distribution. Humanity has done much in reducing 
hours of toil, and may yet do more ; but it will be for 
humanity's welfare in larger considerations than are 
measured by money. The eight -hour question, so con- 
stantly agitated in certain callings, concerns the entire 
people just so far, — and no farther, — as the general 
health and energy of the community depend upon it. 
Farming communities stand aloof from its application; 
and yet there is no question that the farmer's home 
might be even better than it is for developing physical 
and mental vigor, if hours of toil were more carefully 
restricted to meet the conditions of healthful growth and 
activity. 

Other conditions, affecting the employment of chil- 
dren and women, are proper subjects of restriction by 
law; for these also involve the consideration of general 
welfare in the elevation of the physical, mental and 
moral characteristics of the race. Upon the same plane 
must be put all legal restrictions upon methods and ma- 
chinery, reducing the dangers from accident and pro- 
moting the comfort of employes. All restrictions serve 
their purpose only so long as they are appreciated as 
having their reason for existence in general welfare. 
The rights of an employer, under contract with his em- 
ploye, like the rights of a parent in control of his child, 
are subject to the law of good will; and the world will 
yet find a way to make its restrictions felt wherever 
recklessness or carelessness or greed destroys good 
will. 

Nationalization of industry. — A somewhat popular 



276 Rural Wealth and Welfare 

suggestion in solution of labor difficulties is the so- 
called nationalization of industry. This, in general 
terms, is a proposition to equalize compensation and 
avoid fluctuation in both wages and employment by 
public control of all industries under official manage- 
ment. While this involves some principles of socialism, 
more properly discussed in connection with consumption 
of -wealth, its relations to productive industry may be 
briefly presented here. The plans proposed are as yet 
expressed only in most general terms. Even the method, 
of bringing about such a revolution of thought, feeling 
and action has not been devised. Still less ready is 
anyone to point out the 'details of a plan for the actual 
production. The nearest associated ideas are found in 
governmental services through a post office department 
or the management of a system of transportation. 
Most advocates of the method overlook the fact that in 
such government administration of partial industries the 
law of competition is still operative between these en- 
terprises and the universal industry of the people. 

The difficulties in governmental management under 
present conditions are anything but small, especially 
under popular rule, where the dominion of party and 
the influence of position are all-powerful. Under 
monarchial rule the organization of such industries be- 
comes like that of an army, in which arbitrary power 
predominates. It seems easy to see that any effort to 
solve the problems of labor employment by national 
control involves finally the arbitrary decision of power, 
in adjustment of both duties and compensation. The 
management by officials, however those officials are ap- 



Nationalization of Industries 277 

pointed, is not necessarily wiser, more efficient or more 
benevolent than the management by interested men, 
whose life is in natural contact, through business rela- 
tions, with employes. Those who have had experience 
with official control under popular government are not 
likely to expect a readjustment of all interests from the 
standpoint of politicians to be marked by either univer- 
sal good will or universal common sense. It is reasonable 
to suppose that wherever general welfare in actual use 
of wealth can be best promoted by public control, such 
control will come through the free exercise of indi- 
vidual judgment with reference to the work in hand. 
While there ought to be no objection on the part of any 
to a government enterprise which can be shown to serve 
in that way the greatest good of all, nobody ought to 
assume that the nationalization of industries is for the 
greatest good. Each great undertaking will require its 
own proof, not only of the welfare to be expected, but 
of the practical means by which that end can be 
secured. 

The spirit of equity chief. — The trend of experience 
goes to show that true economic interests, not only of 
the community but of individuals, are in accord with 
general principles of welfare. It seems certain that com- 
munities paying the highest wages are those which gain 
the highest return for labor in product, and maintain 
the highest general rates of profit. In general, also, 
those enterprises which are controlled with most care 
for equity in wages and for the general welfare of em- 
ployes are most stable under fluctuations of business 
and most genuinely successful. While wealth may be 



278 Rural Wealth and Welfare 

accumulated unjustly in the hands of those who oppress 
their neighbors, there can be no doubt that in long 
periods of time the best adjustment of all interests gives 
not only the truest welfare but the largest wealth and 
the best use of it. The spirit of equity must eventually 
control both managers and wage -earners, and no other 
disposition can furnish a final solution of the problems 
of distribution between employers and employed. If 
employers are greedy, the wrong will not be righted by 
an equal display of greed on the part of wage -earners. 
The spirit of true philanthropy is the only proper spirit 
for discussion of these questions . 



CHAPTER XX 

PROCEEDS OF CAPITAL : INTEREST AND PENT 

Practical distinctions .— The terms interest and rent 
are distinguished in actual practice by the fact that 
interest is 'paid for the use of capital in some circulating 
form, while rent is paid for the use of fixed capital. 
One who borrows anything, expecting to return not the 
thing itself but its equivalent in value, is said to borrow 
upon interest. One who borrows the same thing, ex- 
pecting to return the identical thing, is said to pay 
rent for its use. Thus interest is paid for control of 
circulating capital unti] an equivalent is returned, and 
rent is paid for control of fixed capital until the same 
articles are returned in prime condition. A farmer who 
borrows a mowing machine from the warehouse, giving 
his note for its value, pays, when he returns that value 
at the end of the year, interest upon his note. If he 
borrows the same machine from his neighbor under con- 
tract to return the machine in good condition at the end 
of the season, he pays rent for its use. The young man 
who borrows his neighbor's farm, expecting at the end 
of five years to make that farm his own, gives a mort- 
gage note, promising at the end of five years to return an 
equivalent value for the farm, with annual interest. 
If, on the contrary, he expects to return the farm itself 

(279) 



280 Rural Wealth and Welfare 

at the end of five years, without reduction in value, he 
makes a lease, embodying this agreement, with annual 
rent for use of the farm. 

Both interest and rent are liable to involve the ele- 
ment of risk as to the proper return of the valuable thing 
promised, and to that extent they partake of the nature 
of profits. The true interest and rent are independent 
of the possible risk, and have to do simply with the ad- 
vantage naturally accruing to the possessor of wealth 
from its use as capital, and forming one of the chief 
reasons for accumulating wealth at all. 

In technical discussion the term rent is usually con- 
fined to the compensation secured from appropriation of 
space, peculiar location, natural fertility, mineral de- 
posits, water privileges, or any natural advantage to be 
used in production. In this limited meaning rent is 
confined to the advantage gained by the owner of wealth 
in any form so affected by the law of supply and demand 
as to gain a scarcity value. The term unearned incre- 
ment, — meaning an increase of value without cost of 
exertion, — has been largely applied to such eases, and 
illustrations are taken chiefly from the ownership of land 
and similar natural forces. The same unearned incre- 
ment, however, accrues to the possessor of any article of 
value or any personal attainment, which through in- 
creasing wants of the community becomes, on that 
account alone, more valuable *in market. Thus a bin 
full of wheat, saved from a year of plenty to a year of 
scarcity, has gained a value abnormal, — that is, from the 
fact of its scarcity. Yet no one would think of applying 
the term rent in such a case, because the foresight which 



Interest and Rent 281 

stored the grain gains its compensation in profits. If the 
same kind of foresight has plotted a city upon wild 
lands, and held a portion of those plotted lots until a 
crowded population competes for their use, such wealth 
is said to be gained upon the principle of rent. The 
difference seems to be chiefly in the greater permanence 
and the gradual advancement of the profits secured. 

The every -day operations of a farming community 
illustrate both interest and rent in all their complications 
and definitions. Every farmer, in estimating the cost of 
his wheat crop, may properly calculate both the interest 
on his capital invested in tools, teams, machinery and 
wages, and the rent of his land, keeping distinct ac- 
counts of interest and rent; or he may combine in one 
account as interest the use of capital in machinery and 
land. If he owns the whole establishment, he is likely 
to combine both interest and rent with the return for 
his foresight and energy in managing the farm under 
the name profits. All these returns, however, come for 
different reasons, though under the same general prin- 
ciple of values expressed in the law of supply and de- 
mand. The farmer working a rented farm and the one 
working a mortgaged farm are alike paying both rent 
and interest, since every farm involves both the wealth 
accumulated by exertion and the w T ealth advanced by 
increasing population. While the owner of the mort- 
gaged farm apparently pays interest, if at the end of the 
term of the mortgage the farm is returned to its former 
owner by foreclosure, the result is that the mortgagee, 
while nominally owner of the land, has simply been a 
renter. In a fair settlement of equities he will have paid 



282 Rural Wealth and Welfare 

for the use of the land he has cultivated. Interest and 
rent are thus seen to be terms separated rather by pecu- 
liarities of application than by difference of principle. 
It is proper, however, to treat them separately for the 
sake of more perfect understanding of the conditions 
applicable to each, 



CHAPTER XXI 



PRINCIPLES OF INTEREST 



Reasons for interest. — The propriety of interest 
under any circumstances has often been questioned, and 
its rightfulness is still bitterly disputed. Both church 
and state have at times denounced the receiving of in- 
terest as criminal. Yet in actual practice of commer- 
cial life throughout the world interest has been sus- 
tained in all ages. The Jewish law prohibited interest 
between neighbors, where the reason for borrowing was 
assumed to be poverty, but authorized it in dealings 
with foreigners, where the transaction was assumed to be 
in trade. The principle upon which interest in all pro- 
ductive industry is actually founded is that capital, 
gained by exertion and saved by self-control, secures to 
its present possessor such advantages of time and choice 
of use for his abilities as can be given by nothing else. 
In the study of production we have seen that time- 
saving is an important result of capital in its various 
forms. A carpenter's kit of tools represents a value in 
use equal at least to the time he might consume in 
making them. He can afford to keep them for an- 
other's use only while they bring to him the advantage 
of that time-saving. His neighbor is willing to secure 
him in that advantage by paying him for the use of the 

(283) 



284 Rural Wealth and Welfare 

tools all, or nearly all, that lie gains by using tools over: 
what he would have without them. The borrower will 1 
still be the gainer by opportunity to do work not possi- 
ble without the tools. The bargain between borrower 
and lender, like any bargain, is a fair one only wheni 
both are benefited. The limits of fairness in the deal I 
are naturally reached when a clear understanding of all! 
conditions is had in open market. Neither borrower 
nor lender can take advantage of the other without 
fraud. Neither is under obligation to give to the other 
without an equivalent. The whole question rests uponi 
service rendered, as truly as in any other bargain. 

A large proportion of the opposition to interest 
arises from a misconception of the phrase, "borrowed I 
money." The fact is that borrowing and lending have 
to do chiefly with other forms of wealth. Most notes 
are given for the transfer of all sorts of property under 
a promise to return equal value in the future. Money 
may not enter into the transaction at all, except as the; 
standard of value is in terms of money. Even wheni 
money is exchanged for a note, the borrower hastens to j 
part with the money for the tools or provisions which i 
make him a profitable producer. In payment of his ■ 
note he offers money again, simply because it commands 
every desirable form of value for the owner of the 
wealth. If a farmer wants a wagon without the present 
means to buy, he offers the dealer his promise to pay j 
after six months, when the corn crop just planted shall 
have matured. If the dealer cannot afford to hold the 
note because he needs the capital in his business, that 
others may be supplied with wagons, either the farmer 



Interest Without Money 285 

or the dealer carries the note to some one who can afford 
to wait for returns, which may be either a banker, 
whose business provides just such accommodation, or a 
neighboring farmer who has just sold his wool. In 
either case, the first farmer borrows what he wants in 
carrying on his business, and at the end of six months, 
through a similar transaction of finding some one ready to 
take his product, pays his note with corn. (See p. 164.) 
Interest is never confined to money transactions, nor 
even to those in which terms of money are used. All 
owners of productive wealth gain interest in its use as 
truly as in lending it. The farmer is not a money- 
lender in general, because his wealth will bring him 
larger profit by its use as stock or machinery. Even 
when he borrows from his neighbors, it is possible that 
he secures a larger interest, though he calls it profit, 
than he pays the lender. Interest is often paid in kind. 
The laughable story of borrowing a hen from one 
neighbor and a sitting of eggs from another, to be 
returned after a time with advantage, is actually par- 
alleled by some transactions. A friend of mine having 
a magnificent pasture agreed with his neighbor, who 
owned a fine flock of ewes, to pasture that flock for 
three years, returning at the end of that time just twice 
the number of sheep received. He explained to me 
that he had made a great bargain, since the wool would 
pay for the use of the pasture, and he should have at 
the end of the three years a flock about equal to the 
flock he returned. This bargain involved interest at 
the rate of 33% per cent, without any terms of money, 
and an indefinite profit to the owner of the pasture in 



286 Rural Wealth and Welfare 

addition to an average price for such use. This profit 
is his return for the risk undertaken; since he promised 
to double the flock under any circumstances, and if foot- 
rot or scab had ruined the flock under his manage- 
ment, he would still have the same obligation toward 
the owner. 

Such bargains will always be made so long as both 
parties are benefited, for no possible construction of 
laws and no diatribes of fanatics can prevent them. 
Any calculation as to the enormous growth of wealth by 
interest is more than balanced by a similar calculation 
of the multiplication of wealth by production. If 
Abraham's shekels at compound interest make an im- 
possible sum of money, Abraham's flock of sheep with 
the ordinary rate of increase makes an equally impos- 
sible worldful. 

Varying rates of interest. — Interest rates are subject 
to fluctuation and variations under the natural relations 
of borrowers and lenders very much as are prices of 
commodities. Variations, in comparison of different 
regions, are due to several causes. In any community 
where enterprise is great and industrial forces are un- 
usually productive, the interest rates are high as com- 
pared with another community with few competitors in 
industrial enterprise and less productive forces. Thus 
in countries having new land producing large crops 
with moderate exertion and an increasing population 
ready to put in such crops, the return for the use of 
capital in provisions, stock and machinery is great, and 
the lender gets high rates of interest. If, added to this 
apparent productiveness, there are risks of failure from 



Varying Bates of Interest 287 

droughts, storms and injurious insects, the bargain is 
more favorable to the lender in expressed terms, though 
it may be less favorable in actual results. Thus risk 
enters practically into calculations of interest, whatever 
the circumstances. 

Interest varies in the same region with a variation of 
energy and productive enterprise or of the speculative 
spirit undertaking great improvements, and on the other 
hand with any change of circumstances affecting uni- 
versal credit. Distrust on the part of anybody reduces 
the readiness with which borrowers find lenders. In 
times of widespread lack of confidence, when all credit 
becomes debt, the borrower is likely to offer unusual 
rates of interest. And the few who are willing to lend 
at all expect enormous profits in such interest. 

Similar variations in rates of interest are found be- 
tween different classes of borrowers, due to the varia- 
tion of risk. Thus promises to pay on demand, with 
personal security of two good paymasters, will usually 
be accepted at very low rates of interest, since the 
owner of wealth so loaned feels sure of having the 
wealth when he wants it. Government loans in times 
of peace and prosperity being essentially without risk, 
approach very near the same low rate of interest, since 
the owner of these securities believes himself at any 
time able to command the use of his wealth for any 
purpose by a transfer of these securities. If for any 
reason, official or legislative, public confidence is dis- 
turbed, rates of interest on such securities rise propor- 
tionally through the sale at a discount. Even a law 
prohibiting such sale would have exactly the contrary 



288 Rural Wealth and Welfare 

effect to that intended, because of creating additional 
distrust. Loans upon time, if secured by productive 
landed estate not subject to unusual risks, can usually be 
made at moderate rates, and form a fair basis for judg- 
ing the normal interest in any region. Loans secured 
by chattel mortgage bring higher rates, because the 
chattels involved are a less certain means of payment 
than landed estate. Loans secured upon unproductive 
lands, whether in prospective farms or city lots, are 
made at high rates, not only because these lands fail to 
furnish in themselves the means of interest payment, 
but because they represent the speculative energy of 
their owners with unmeasured risk. All these varia- 
tions and fluctuations are found in every community, 
and grow out of the natural wants of borrowers and 
the natural feelings of lenders. Custom may have some- 
thing to do with rates in special cases, as it has to do 
with wages and retail prices, but in the range of fre- 
quent dealing between borrowers and lenders rates 
follow the higgling of the market as truly as prices of 
commodities. 

Ustiry laws. — It has been the custom for ages to 
distinguish between interest and usury, interest being 
supposed to be a fair payment for use of borrowed 
wealth and usury a larger payment in the distress of a 
borrower. Usury once meant only use, the equivalent 
of interest, but since it was once prohibited by law in 
England, the name is now attached to what is still pro- 
hibited by law, an interest above a definite rate pre- 
scribed by statute. . The object of such legal restric- 
tions is evidently protection of the borrower against 



Usury Laws 289 

extortion. Yet it is practically proved by experience 
of the world that such restrictions operate against 
the borrower by limiting lenders in open market and 
sometimes closing the market entirely. The would-be 
borrower, under adverse conditions in the market, is 
obliged to find in some byway a lender whose scruples 
against infringement upon the lav/ may be overcome by 
extra payment. Under such circumstances there is no 
market rate, and borrowers bind themselves in numer- 
ous ways to special payments not in direct conflict with 
the letter of the law. Evasions of restrictions under 
such circumstances are inevitable. A farmer buys a 
hundred -dollar horse, giving a note, payable in one 
year without interest, for $120; or he sells his note to a 
neighbor at what he will give; or he goes to a broker 
and pays him a commission for securing a loan at the 
legal rate of interest. Even at a bank, prohibited by 
law from taking more than the legal discount on the 
pain of losing its charter, a borrower may give his note 
for $500, tacitly agreeing to leave on deposit a fifth of 
the sum, thus paying interest on $500 for the use of 
$400. 

All these forms of evasion are easily adopted with 
very little possibility of conviction, even when usury is 
charged. Even in the most flagrant violation of laws 
the chances of conviction are greatly restricted by the 
fact that a prosecuting witness, who, after making a 
contract in violation of law, takes advantage of that 
law to violate his contract, destroys all credit for him- 
;self , and so comes under the ban of society. The best 
methods of public restriction against extortion of any 



290 Rural Wealth and Welfare 

kind in interest, in rent or in prices of commodities 
are those that provide for publicity of contracts. Where 
no legal restrictions npon rates of interest are fixed, 
current rates are much more likely to be public and 
widely advertised, and extortion is less possible than 
where the law encourages secret contracts by the need 
of evasion. It is quite possible that society will find a 
way of securing against the extortion of pawn-shops 
and secret brokerage by a public organization com- 
peting honestly for the same patronage. Such com- 
panies have been organized in a few cities with success 
in meeting the wants of the distressed, under such re- 
strictions of charter and management as insure fair 
dealing. It seems as possible to regulate such matters 
by license and inspection as it is to control the hack- 
men of a whole city 

Loan associations. — It is proper in this connection 
to refer to loan associations, the growth of recent years. 
The purpose of such associations is direct cooperation 
in borrowing and lending among neighbors similarly 
situated as to property. They are especially adapted to 
assist wage -earners in securing comfortable homes, for 
which they can pay gradually from their earnings. The 
system, however, has been widely extended, to the ad- 
vantage of different classes of property owners, even to 
the establishment of cooperative banks among farmers. 
The essentials to success and safety in such associa- 
tions are, first, that they shall be strictly local, confined 
to territory within which mutual acquaintance can give 
a fair basis for genuine credit ; second, the objects 
sought by individual borrowers must be fairly equal in 



Loan Associations 291 

risk as well as in ends to be served; third, the manage- 
ment must be thoroughly trustworthy, with a genuine 
interest of all shareholders in the selection of officers; 
fourth, all shareholders should have similar relations to 
the association as both borrowers and lenders, and each 
shareholder's responsibility should cease at the final set- 
tlement of his obligation; fifth, provision should be 
made for frequent auditing of accounts, official reports 
and inspection. 

Uses of interest. — In closing the subject of interest, 
it is well to recall the fact that interest exists iu the very 
nature of productive energies, and that ability to 
transfer the use of property in any form of capital with- 
out transferring the interest is most useful to society. 
It sustains the aged, who must otherwise be wholly de- 
pendent, and the childhood of the race in all development 
of body, mind and soul. Interest sustains the mass of 
educational and charitable institutions, as well as the 
individual life of multitudes whose present earnings 
could not keep bodj^ and soul together. Moreover, the 
possibility of paying interest secures to the enterprising 
young men of the world the opportunity to make 
their highest energies productive. Thus the matter of 
interest pervades the thrift of society as well as the sus- 
tenance, and cultivates everywhere that present economy 
which provides for the rainy day. The fact that nearly 
one -fifteenth of the population of the United States are 
depositors in savings banks alone proves the extent and 
importance of interest to the general welfare. With 
added facilities for depositing small savings in postal 
savings banks, the advantage would be still more widely 



292 Rural Wealth and Welfare 

felt, and the general economy in the nse of both earnings 
and capital would be promoted. All this extension of in- 
terest-bearing increases the tendency everywhere noticed 
to a diminution of current rates. With a multiplication 
of capital in any community, the rates of wages increase, 
while the rates of interest diminish. Both tendencies 
are natural effects of the same cause. 



CHAPTER XXII 

PRINCIPLES OF LAND BENT 

Bent values of land. — The general character of rent, 
as connected with the use of fixed capital and so asso- 
ciated with interest, has already been touched upon. In 
that sense it depends upon the fact that possession of 
wealth is universally an advantage in production of fu- 
ture wealth and is subject to all the peculiarities affect- 
ing interest, But land rent, as represented in the value 
of farms, city lots, mineral claims, fisheries, water 
privileges, wharves, etc., has peculiarities of its own. 
Its connection directly with rural wealth in the value 
of farm lands makes it of special importance in this dis- 
cussion. While rent, as such, is comparatively unimpor- 
tant to farming interests in the United States, where most 
of the land is worked by its owners, the principle is in- 
volved as fully in the transfer value of farms as it is in 
countries where land is almost universally rented for 
farm purposes, like England and Ireland. It is simply 
necessary to remember that the rent question in such a 
country as England, where land is seldom transferred 
from owner to owner (but all values are expressed in the 
terms of annual rental), is quite different in form from 
the question in our country, where transfer of landed 
property is free and common, and the rental is regulated 

(293) 



294 Rural Wealth and Welfare 

largely by current rates of interest npon land values. 
In England, too, the rent question involves long stand- 
ing relations between the people and landed proprietors 
who, for generation after generation, have been rulers 
of the people as well as landlords, and are still 
the natural magistrates over the renters upon their es- 
tates. Yet the principal occasion for rents in such 
countries is exactly the same as that for varying values 
of land in the United States. Peculiar intricacies of 
methods of rent-paying and of terms in leases, varying 
with the customs of different countries, have little im- 
portance in the United States, except for comparisons. 

The United States afford superior advantages for the 
study of land values fairly independent of restrictive 
laws or customs. The rapid settlement of wild lands by 
farmers and the rapid building of cities under free com- 
petition give the fairest illustration of tendencies in land 
values to be found in the world. The fact that the 
government for the past fifty years has encouraged the 
settlement of new land at the bare cost of establishing 
ownership makes the problem almost as simple as if 
the government had no voice in the distribution. 

It may be proper to recall the conditions under 
which any individual has been able to secure the abso- 
lute control of land as a proprietor: First, by pre- 
emption, involving temporary residence until the land 
is purchased and patented, at the nominal price of $1.25 
an acre, or $2.50 within ten miles of such, railroads 
as may have been subsidized by a gift of one -half the 
land within the same limits. Second, by homestead 
preemption, by which any head of a family, present or 



United States Lands 295 

prospective, can secure 160 acres of land by payment of 
certain registration fees, amounting in all to less than 
$20 upon the average, and making his residence upon 
the land for a period of five years. The issue of a 
patent at the end of the five years establishes ownership. 
The soldier's homestead, offered to those who had 
served as volunteers in the army of the nation, varied 
from this only in a reduced term of residence. Third, 
homesteaders, as well as others, could secure additional 
lands under a provision for tree culture on the treeless 
prairies, the requirement being the planting of a few 
acres of trees and the maintenance of culture on those 
acres for a period of eight years. Even the establish- 
ment of trees in permanent growth was not a requisite. 
Fourth, by certain outlay for irrigation purposes in 
arid lands a tract of 640 acres could be secured. In 
addition to these, certain land grants to the several 
states led to the issue of scrip, entitling the possessor to 
locate on government lands upon payment of only fees 
of registration. Certain states, within whose borders 
public lands did not exist, being unable to hold lands 
in other states or territories, sold scrip at less than half 
the price asked by the government for lands. 

All these methods operated not only as a stimulant 
to the settlement of new territory, but as a check upon 
rising values of land in the older communities. Never- 
theless, this rapid development has given the best 
of opportunities for watching the tendencies of land 
values. 

Propriety of land rent. — The right of property in 
land, like every other property right, rests upon its 



296 Rural Wealth and Welfare 

advantage in the welfare of communities. Among 
savage tribes individual control of plots of ground 
would interfere with welfare, as hindering the only use 
to which the land is put in hunting. Among people 
living by herding no nice dividing lines are needed, 
though strife between herdsmen, since the days of 
Abraham and Lot, results from the mingling of herds 
upon the same feeding grounds. With the actual 
tillage of soil, control of the space tilled becomes abso- 
lutely necessary, and more necessary with every im- 
provement in agriculture which takes the nature of 
permanent improvement upon the soil. No agriculture 
beyond the merest skinning of the surface has ever 
existed without permanent occupation. Even where the 
land is distinctly owned, but used under temporary 
leases, few permanent improvements in agriculture are 
possible. 

The necessary permanence of control over the prod- 
ucts of toil makes an essentially permanent control of 
land necessary to the common welfare. For this reason 
the progress of civilization everywhere demands more 
distinct boundaries of landed property, and this in the 
interest of the whole community, which shares in the 
progress. The more intensive and far-seeing the 
methods of farming become, the greater the necessity 
for fixed boundaries. This necessity is recognized in 
all provisions for exact surveys, complete records of 
transfers in ownership, and finally for government 
guaranty of title. Such ownership underlies all pruden- 
tial consumption of wealth for future returns. The 
loss to communities from want of it is seen in the waste 



Propriety of Land Bent 297 

of game in unappropriated countries and the destruc- 
tion of the seals in the seal fisheries. Yet this owner- 
ship is still subject under all circumstances to the law 
of welfare for the entire community. The community's 
right of eminent domain has always been recognized in 
the need of public highways and other public improve- 
ments, and is likely to be still further recognized with 
any new necessity, like the control of injurious insects 
or quarantine against disease. Yet none of these re- 
strictions diminish the necessity of ownership, in the 
sense of individual control for all purposes of agricul- 
ture, manufactures, commerce and social relations. 
This individual control is intimately connected with our 
ideas of rent, and would be still, though all the lands 
were managed under one proprietorship, and that a 
public one. Rent would accrue and be paid, though the 
whole people held title to the land. 

The sources of land values. — The value of land, like 
every other value, is the result of comparisons. What- 
ever advantage is given to a producer by his posses- 
sion of land is likely to form his estimate of its 
value. In the comparison of two farms of equal dimen- 
sions every difference in fertility, location as to drain- 
age, exposure, or convenience to market or social ad- 
vantages, adaptability to improved methods in agri- 
culture and convenience of arrangement, will enter into 
the estimate of worth. If one of the farms can be had 
for the asking, the other will be worth just what its 
advantages will add to the power of the owner in the 
production of wealth, provided both are considered alike 
as simply machines for producing food. Usually, how- 



298 Rural Wealth and Welfare 

ever, economy in the consumption of wealth is consid- 
ered also. In a new country lands most easily accessi- 
ble and readily tillable are chosen first. With added 
demand for food, less accessible or less easily tillable 
lands are occupied. At once the more accessible have a 
value equal to the greater ease with which the same prod- 
uct can be offered in market. If the difference were only 
a mile of hauling all produce and all commodities for 
which produce is exchanged, that cost of transportation 
would make the value of the nearest land. If the differ- 
ence is simply in yield for a given amount of labor, the 
land which yields thirty bushels of wheat to the acre, 
when land which yields twenty bushels can be had for 
the taking, will be worth ten bushels of wheat a year, 
and its value will be estimated in dollars at a sum which 
securely at interest will bring a similar return. If, by 
and by, the demand for food or improvement in trans- 
portation or an easier method makes it worth while to 
cultivate land yielding only ten bushels of wheat to the 
acre, the annual value of land yielding twenty bushels 
will be ten bushels, and that of the land yielding thirty 
bushels will have become twenty bushels. 

Thus the rent, and correspondingly the value of 
farms, increases with the increasing demand for farm 
products, whether that demand results from the in- 
creased number of eaters at hand, from the increased 
ability of these eaters to supply their wants, or from 
ready transportation to eaters elsewhere. Many influ- 
ences in various directions affect the tendency to an in- 
crease of land values with the increase of population. 
Some have been led to the assumption that only the multi- 



The Sources of Land Values 299 

plication of food -eaters, increasing the need for land, 
makes rent possible. Connecting it with the theory of 
Malthus that population tends to increase in geometrical 
ratio, while food can increase only in arithmetical ratio, 
they have denounced rent as a price paid to monopolists 
under stress of danger from starvation. These forget 
that rent is payable as truly out of increasing abilities 
of individuals to meet increasing wants as under the 
spur of more distressing wants. Indeed, starvation, or 
the approach to it, never pays rent, however strong an 
incentive it may be to promise rent. 

Bent in price of products. — Does the value of the 
land upon which my wheat is raised enter into the price 
of my wheat 1 If all land values were destroyed, would 
the wheat of the world be cheaper, because its cost would 
be diminished? The price at any time is just enough to 
bring the supply to market and keep it there. A portion 
of the supply has cost even more than it brings to its 
owner. If any brings more than cost, the difference goes 
either to the energetic raiser using improved methods, 
or to the fortunate receiver of timely showers, or to the 
possessor of the fruitful field. Neither the profit of the 
raiser, through his method and the shower, nor the rent 
of the fertile field has made a bushel of wheat less or 
more valuable in market. The value of the wheat in the 
market makes both the profit and the rent. If the value 
of wheat falls, the value of best wheat lands sometimes 
follows; but land values do not directly affect prices of 
products, though they may be directly dependent upon 
those prices. 

Indirectly, however, the value of land may affect 



300 Rural Wealth and Welfare 

prices of products. Land, in certain speculative move- 
ments of society, gains a value for future use. If the 
fertile fields are held for speculative purposes, less fertile 
fields must furnish a limited supply at increased price. 
If the fields are wanted for homes, the supply must come 
from a distance at greater cost, or be raised on fewer 
acres by more costly tillage, and will not come till the 
price is increased. Thus high rents, or land values, if 
maintained by outward forces may diminish the total 
product, and so affect prices. But no conspiracy of land 
holders can affect the price of their products so long as 
their lands are employed in supplying the market. 

Variation in land values. — Rents vary in different 
countries under various customs of those countries, and 
so land values can be compared only by knowing the 
customs and laws which influence the transfer of landed 
property, either by deed or by lease. Differences in 
value are often due to considerations entirely distinct 
from production. Farms are homes as well as machines; 
and the privileges of home life, with all the relations of 
family, friendship and patriotic associations, may rouse 
competition that greatly influences the market value of 
farms. In any community, whatever custom or law 
hinders competition in farming affects the relative value 
of farms in productive industry. Peculiarities in the 
method of holding lands have much to do with their 
value. The hopes and expectations of the people have 
large influence. Whatever stimulates enterprise and 
increases speculative energy enlarges the estimate of 
land value. Whatever depreciates abilities or discourages 
enterprise diminishes land value. Whatever encourages 



Variation in Land Values 301 

permanent improvements and far-sighted plans in farm- 
ing increases land prices. Whatever discourages the 
spirit of improvement reduces such prices. 

In some of these ways it is possible to account for 
great differences of value in regions apparently equal in 
natural advantages. Thus nobody wants lands in 
Turkey, however fertile, in comparison with lands in 
a free country like ours. Countries under a poor system 
of agriculture with inefficient labor cannot maintain high 
value of land. Ignorance and thriftlessness in a com- 
munity of laborers operates in the same way. Thus the 
habits of the people, as well as their laws, enter into the 
question of rent. In countries where large estates are 
parceled out to renters, generation after generation, the 
customary terms of leases as to time, method of payment, 
adjustment of improvements, restrictions as to methods 
of tillage, and requirement of capital, enter largely into 
the question of rents. In some the fear of eviction under 
arrearages cuts a prominent figure; in others the con- 
fiscation of improvements destroys all enterprise. Upon 
the continent of Europe, in some places, the payment of 
rent in produce, — what we call working of land upon 
shares, — greatly limits individual enterprise, though it 
gives to the land owner a direct control in the methods 
employed on the land. Restrictions of law or of custom 
upon transfer of ownership always have the effect of 
diminishing the general productiveness by hindering the 
natural competition of productive enterprise. The result 
of all laws of entail, by which enormous estates are held 
from generation to generation under control of the same 
family, is universally deprecated because of its interfer- 



302 Rural Wealth and Welfare 

ence with the natural law of suppty and demand as to 
farms and homes. All such restrictions favor the spirit 
of monopoly and cultivate arbitrary power, which in 
every way hinders progress. 

Recent decrease of land values. — In the United States^ 
during recent years there has been a decided shrinkage 
of land values in most of the country. Several evident 
causes appear worthy of mention. The most evident is 
a rapid increase of farms on the western plains, recently 
bringing their products into the competition. These 
prairie regions give the largest range for farming in the 
world. In the same connection is the introduction, upon 
these immense fields of cheap land, of extensive ma- 
chinery by which the productive power of labor is multi- 
plied. The labor of one man for 300 days is said to have 
produced in California 5,000 bushels of wheat, so that 
one man's labor on many acres gives to each of 1,000 
people a barrel of flour a year. Next to this is the open- 
ing of new agricultural enterprises in South America, 
Australia, India and South Africa, with still greater 
prospects in Siberia — all the result of great improve- 
ments in transportation, opening to these regions the 
world's great markets. This has pushed the supply of' 
staple products toward the condition of over-production. 
The same cause has diminished the demand for our 
staples by greatly stimulating the consumption of foreign 
fruits and nuts. Most recently has come the depression 
from loss of confidence in enterprise, through excessive 
speculation and waste of capital, undermining the market 
for land as well as for all the machinery of production. 
In these conditions the whole world has shared. 



Drift of Population 303 

Population drifting to cities. — The drift of farm pop- 
ulation toward the cities is a symptom of the changed 
conditions, not a cause. If, as decided by an expert in- 
vestigator, three men on a farm do the work that four- 
teen did forty years ago, the farms can well spare to the 
cities an increasing number of its boys and girls. The 
drift is real and permanent, diminishing rural popula- 
tion in 100 years from 96 per cent of the whole to 70 
per cent, though exaggerated in figures through arbi- 
trary division between towns and cities. This move- 
meat has been noticed the world over since 1848, when 
machinery began to affect agricultural production. 

That this drift is wholesome is evident, if we look at 
the diversity of employment resulting and the improved 
welfare of all. A simple comparison of figures from the 
United States census will show the readjustment of em- 
ployment. No one can doubt the advantage gained in 
the entire nation. 

Abandoned farms. — The most disturbing feature of 
this readjustment is the desertion of some farms in the 
rougher parts of New England and the drier parts of 
the West. These lands will find a profitable use in 
the woodlots through the East, and in grazing ranges 
through the West, with slight permanent loss. They are 
not signs of poverty, but of a developing thrift, just as 
the abandoned country woolen mills tell the story of im- 
mense growth in the factory methods. While individ- 
uals seeking profit in sale or rent of their farms may 
suffer in any such shrinkage of local values, it must not 
be forgotten that the total of rural welfare is not neces- 
sarily diminished. Land values, aside from improve- 



304 Rural Wealth and Welfare 

merits, are everywhere evidence of limitations to welfare 
in some special direction. If human enterprise and in- 
vention and thrift lessen such limitations, the world is 
better off. 

The great mass of farmers, who think more of their 
homes than of property, will suffer little from lower 
prices of land unless such low prices result from a gen- 
eral lack of thrift and of adaptation to new circum- 
stances. While the changes in price which affect reduc- 
tion of rent values do require readjustment of plans and 
methods, the farmer who keeps in touch with the world's 
work will not suffer, but gain, in the general advance- 
ment. In many instances, the low condition of farm 
property is due to unthrifty neglect of farmers in whole 
neighborhoods. Bad roads, short schools, weak fences 
and poor stock are as often a cause as an effect of low 
prices of land. Whole regions in our country suffer in 
this way from unthrift, whatever the price of farm prod- 
ucts or of lands. 

Farms in the United States. — These are under con- 
ditions best suited to attend the general thrift of the 
world in every way. Ownership is not complicated in 
any way with magisterial duties or prestige or entail- 
ment, as in England. It is not so distinctly hereditary 
as to embarrass agriculture by extreme subdivision of 
farms, as in France and other portions of Europe. It is 
in no danger of combination into great estates under ab- 
sentee landlords, as in Ireland. Its laws of transfer and 
guaranty are growing more and more simple and direct, 
while protection to homestead rights is strong. Farm- 
ers themselves have such responsibility in state and na- 



Farms in the United States 305 

tion as to make their genuine interests felt everywhere, 
and no system of caste can make them a peasantry, as in 
most of the Old World. Indeed, the farmer in every 
region makes his farm; and the enterprising, educated 
farmer of the next generation in our country will find in 
himself the forces at work to give value to his land. 
The speculative movement in land holding will be out- 
grown when genuine farm homes are more prized for 
their welfare than for their wealth; but this very wel- 
fare will maintain a stable value in lands. 



PART III 

Consumption of Wealth 



CHAPTER XXIII 

WEALTH USED BY INDIVIDUALS 

Wealth to be consumed for welfare. — The only eco- 
nomic motive for the accumulation of wealth is its use 
in promotion of welfare. While the old maxim says, 
"A penny saved is worth two gained," every one recog- 
nizes the penny as absolutely worthless except in view of 
some utility to be gained in spending it. So with every 
form of wealth. All economic value disappears when 
the thought of use is wanting. Such use, whether prac- 
tically instantaneous, like the destruction, of the gun- 
powder projecting the bullet, or extended through 
hundreds of years, as in the wearing out of a castle, or 
a bridge, is properly called consumption of wealth. 

A majority of the great problems concerning social 
I welfare are connected with the use of wealth, and there- 
fore fall under the discussion of consumption. Indeed, 
so long as there is little accumulated wealth, as in the 
savage state, social problems have little significance. 
The statement of the Apostle Paul. " The love of money 

(307) 



308 Rural Wealth and Welfare 

is the root of all evil," while not confined in application: 
to wealth already accumulated, has its most important! 
bearing in the fact that wealth accumulated is itself a: 
power to be used or abused by whoever controls it. The: 
saying of Emerson, " The best political economy is care 
and culture of men," applies most strictly to the uses of I 
wealth and the methods of its consumption. The great! 
question of today in every civilized land is, How can the 
accumulations of power in the shape of wealth made by. 
this generation be used to establish a continuous wel- 
fare, not only for this generation, but for its successors? 
The wants of society today include not only a reasonable 
provision for life and health and wisdom and virtue dur- 
ing the life of those who are now active, but an equal 
provision for the same wants increased with each suc- 
ceeding generation. In all thought of consuming wealth, 
we must remember that power in this form is rightly 
used only when power in some other form results. Thus 
wealth is consumed, according to natural laws, either fori 
reproducing itself in more advantageous form or fort 
sustaining human power in form of health or wisdom 
or virtue. 

We have social welfare as the result of wealth con- 
sumed, or used up. Society is interested in all the wealth 
accumulated, and the methods of its accumulation and: 
its fair distribution are a part of social machinery; yeti 
these have their chief significance in the final consump- 
tion. It is not what we have, but what we do with it,, 
that makes society interested in our possessions. It is- 
not what society has, but how it uses it, that settles the 
chief questions of welfare or illfare. Not only gun- 



Wealth for Welfare 309 

powder, but every conceivable power in material wealth, 
has blessing or bane in the nse to which it is put. So 
the welfare of a community cannot be judged by the 
amount and kind of wealth produced or by the methods 
in production or by the distribution of ownership. 
These may be significant in showing the trend of social 
customs as to individual control, but the last inquiry 
will still have to be, What welfare comes to the entire 
community when all this wealth is used ? Moreover, no 
analysis of qualities in any substance called wealth can 
measure the welfare involved in its use. Its relation to 
the individual using it and his relation to the whole 
community, with a careful analysis of wants met and 
character developed, must be considered. The final 
question is, How many and what kind of wants are 
satisfied ? 

Use of wealth individual. — It is necessary to realize 
that the social organization is maintained solely for the 
sake of individuals. All study of welfare and illfare is 
a study of individual human beings. The mutual rela- 
tions of these human beings in society are means to 
individual life, growth and enjoyment. Even the total 
power of a generation in society is dependent upon how 
the individual wants of individual members of that so- 
ciety are met. Some of the greatest mistakes in estimat- 
ing social welfare arise from overlooking the essential 
individuality of wants, upon which all wealth depends 
for its use. 

This individuality makes the proper consumption of 
wealth largely a question of right and wrong. The 
possessor of any form of wealth is obliged to recognize 



310 Rural Wealth and Welfare 

his place in society as a promoter of welfare, and society 
compels, as far as it is able, a recognition of individual 
needs. Yet the very nature of consumption, as concerned 
with individual wants, makes individual judgment su- 
preme in the use of wealth. It is my ideal of good 
health, high culture and sound morals that must be met 
for my enjoyment. My welfare, so long as I have 
rational powers, is the meeting of my ideal. Society 
rightly hesitates to interfere with my ideals by force as 
long as my actions do not disturb the welfare of my 
neighbors. The necessity of human liberty for actual 
welfare limits the control of society* to very evident in- 
fringements upon others' welfare in every activity, in- 
cluding the use of wealth as well as other powers. This 
very restriction is in the interest of highest total enjoy- 
ment of welfare in the whole community. 

Individual responsibility for use of wealth. — In esti- 
mating the proper uses of wealth, it is necessary to 
remember that mere animal existence is a very small 
part of human welfare. It would not be enough for any 
human society that every individual in it be fed, clothed, 
warmed and maintained in reasonably long life. The 
highest uniformity of mere animal enjoyment would not 
make a society worthy to be called human. Even uni- 
formity of wants far higher, with uniform supply for 
those wants, would give but little organization and but 
little total welfare if that uniformity was brought by 
curtailment of natural powers or by constraint that 
hinders growth. The most natural fact among human 
beings, as in all the rest of nature, is variety; and every 
conception of proper consumption of wealth must involve 



Use of Wealth Individual 311 

this thought of variety of individuals in wants and 
powers left free to grow. It is a purely false assumption 
that the ideal community toward which all ought to 
strive is a community of equals in either ability or ca- 
pacity. That is the ideal community which gives to 
every member of it opportunity to make most of himself; 
that is, to make himself most useful, and able to enjoy 
the truest use of his powers. 

Hence we find the tendency in every community, with 
reference to wealth as to other individual forces, to 
recognize early and complete personal responsibilty. 
This personal responsibility makes the question of con- 
sumption of wealth a question of morals as well as of 
wisdom. The whole discussion here turns upon the 
wisdom or unwisdom of certain personal uses or social 
uses of what the world has accumulated. We can ask 
what use of wealth is prudent, what imprudent ; then 
what social organization best develops the wisdom which 
secures a prudent use of wealth ; and finally, how far 
and in what ways society can act as a unit in the place 
of individuals. The machinery of government then be- 
comes a part of every person's welfare, and his relation 
to its maintenance by contribution of his wealth is a 
part of prudent consumption. The economic question in 
consumption, then, involves not so much what one can 
get from society as what he can give to society, since his 
welfare comes largely through organization in the use 
of accumulated wealth. 



CHAPTER XXIV 

PRUDENT CONSUMPTION 

Prudent uses of wealth. — It has already been sug- 
gested that a proper use of wealth looks always beyond 
the present. We accumulate, not only to spend, but to 
spend in such a way as will give larger abilities in the 
future. The name prudential consumption has been 
given to all that use of wealth which has for its end the 
maintenance of individual powers at highest efficiency 
for the longest life and provision for a more efficient pos- 
terity with more efficient instruments of production. 

It is prudential use of wealth to gather into the 
farm, not only such machinery in the shape of build- 
ings, fences and roadways as will make the future labor 
more effective, but all possible fertility that will make 
the future owners of the farm a larger welfare in pos- 
session. All wealth put into the form of productive 
capital is prudentially consumed. All so-called perma- 
nent improvements which look to the better satisfaction 
of future wants fulfil the condition of prudent fore- 
sight. All public improvements are really such, when 
this far-seeing provision for future wants and abilities 
of society is made. Such methods are the genuine eco- 
nomic saving in which the community should be encour- 
aged. A saving which merely stores against a future 
personal want contributes less to general welfare, and 

(312) 



Prudent Use of Wealth 313 

does not stimulate the natural growth of wants in the 
individual, which is the chief source of increasing 
power. The one who saves that he may have better 
tools with which to do more for his future satisfaction, 
not only adds to his physical abilities to meet his daily 
wants, but adds the strongest stimulant to energy in his 
work. The supply of ordinary wants being provided 
for, new wants arise. 

In the spirit of prudential consumption such wants 
are encouraged as give greater and greater abilities. 
Thus the ideal of life is constantly raised, and the strug- 
gle is not for existence but for higher enjoyment and 
more genuine welfare. The wealth which comes in this 
accumulation of capital for larger accomplishment aids 
true philanthropy. The whole world gets more of wel- 
fare with every addition made by farmers to their work- 
ing capital. In the same way all increase of capital in 
machinery, tools, warehouses, ships and other means of 
transport contribute to a philanthropy that makes 
society richer. 

Such saving is entirely opposed to the miserly spirit 
which hides wealth because of mere love of possession 
or fear of future want. It is the true way of both 
spending and having, since it expends earnings for that 
which continues to aid in bringing larger returns to 
meet increasing want. That social system is most pru- 
dent for the world which accumulates productive capital 
without reducing any part of society to poverty. Pru- 
dence, however, requires that this capital saving be ad- 
justed to the abilities of the community in which it is to 
be used. The building of an enormous factory, where 



314 Rural Wealth and Welfare 

skill has yet to be developed and where a market is 
wanting, wonld be the height of imprudence. Such 
waste is sometimes seen under the false stimulant of a 
bounty or a restrictive tariff. Just so, great public 
improvements upon rivers, harbors and highways are a 
part of economy and prudent investment of wealth only 
when a community is able to use them to advantage. 
The test of prudence in capital saving is in its nice 
adjustment to the abilities of the users. 

Prudent adjustment of capital. — A still further ad- 
justment is required by prudence between the capital 
put into fixed forms and the circulating capital needed 
for best use of the more lasting machinery. A farmer 
is said to be stock poor when he overloads his farm or 
crowds his farm buildings with growing stock. Having 
all his capital in stock, he is unable to handle it to 
advantage, and must readjust his capital in live stock 
to his capital in the farm and machinery by selling some 
of his stock and adding to the value of his farm. On 
the other hand, many a farmer is land poor, where the 
bulk of his capital is invested in land, while he cannot 
command circulating capital in stock and wages sufficient 
to make the land useful. He needs, in the spirit of pru- 
dence, to sell some of his land for the sake of current 
funds to invest in live stock and in labor. The same 
principle applies to all investments of capital. A rail- 
road may so exhaust the funds of the community in 
building it that it cannot be fairly manned for work. 
Sometimes a whole nation invests so largely in per- 
manent forms of capital as to bring distress and poverty 
from want of means to use the great machine. 



Adjustment of Capital 315 

Prudence also requires a further adjustment between 
the amount of labor directly producing wealth and that 
employed in what maybe called the arts of consump- 
tion, contributing- directly to personal comfort and en- 
joyment. The neatness of a farmer's yard, outbuild- 
ings, fences and machinery is a part of his welfare. It 
also indicates a certain thrift, which enhances the value 
of the farm. But it is a proper sign of such thrift 
when it grows naturally out of the productive energy 
employed upon the crops and the stock. The wealth 
used in maintaining this neatness is not wasted, but it 
will not reproduce itself. It must be supplied from 
other sources in direct production. All services in the 
household, in contributing to bodily comfort of the 
family, make an essential part of human welfare, but 
prudence requires such an adjustment of these services 
to the total wealth -producing energy that they may be 
maintained without reducing the total power. All pub- 
lic expenditures in the care of streets and parks are an 
essential to welfare so long as the sources of wealth 
production are kept the more active from such advan- 
tages. The test of prudence in all such adjustment is 
the increase of power in wealth -production, along with 
increasing welfare. 

Provision for future wants. — True prudence is largely 
foresight, and so is the enterprise of speculative energy 
which provides any product for a future market. No 
more careful adjustment is necessary than that which 
secures such a product of farm or factory as the world 
will need when it reaches its actual market. The great- 
est wisdom is needed in studying the conditions of a 



316 Rural Wealth and Welfare 

community with reference to its future wants, and the 
supply actually accumulating for meeting those wants. 

Farmers need, as truly as any producers, to know the 
wants of the world for which they are producing food. 
The crops they plant in the spring will actually be con- 
sumed in large measure during the following year. Pru- 
dence suggests that they plant such crops as will be 
most in demand. If they judge by the market today, 
they are in danger of two errors : first, of overestimat- 
ing the future demand, which may be satisfied before the 
new crop comes ; second, of diverting from ordinary 
staple crops too large a portion of the crop-raising force. 
Common experience has taught that a high price of hops 
or onions or broom corn has almost certainly wrought a 
reduction of the price for succeeding crops below the 
normal cost. Still larger foresight is needed with refer- 
ence to the raising of live stock, which requires more 
than a single season's investment of capital. To stock 
a farm with hogs, sheep, cattle or horses, requires from 
one to five years of accumulated capital. The record of 
farm stock shows successive waves of such production 
in direct opposition to prudence. (Chart No. 4, p. 83.) 

The manufacturing world has similar experiences of 
imprudent consumption in the effort to forestall a mar- 
ket. But the record of failures in this respect is scarcely 
as marked, because of more business-like collection of. 
information for the guidance of judgment. Farmers too 
generally follow the lead of their neighbors in adjust- 
ment of crops or stock. Manufacturers more generally 
try to do what their rivals are not doing. Success in 
producing what is not finally wanted we call overpro- 



Frovision for Future Wants 317 

duction. While the whole world is warned against this, 
each individual producer fails to study as well as he 
might the means of avoiding it. 

Prudential consumption does not properly provide for 
those speculative dealings which end simply in a read- 
justment of wealth by gains on the one side through 
losses on the other. All these imply an actual waste of 
wealth and energy, whether they are exhibited in a 
gambling machine or a board of trade. But there are 
certain great enterprises, like wonderful inventions, 
which involve a prudential consumption of wealth. 
The wealth consumed in developing the electric tele- 
graph system, or in laying the Atlantic cable, everyone 
would judge to be well invested. Every thought of 
prudence sustains such expenditure. Yet the spirit of 
invention, as a mere venture in desire to hit upon some- 
thing which may chance to be wanted, shows lack of 
prudence, and the world suffers by great waste of energy 
in this direction. The only test of prudential consump- 
tion in provision for the future market is in the careful 
study of all conditions, favorable and unfavorable. 

Consumption for growth. — True prudence in public 
improvements has just been mentioned, but such pru- 
dence has a larger range in promoting the permanent 
growth of human powers and capacities. Every wise 
father wishes his children to know more, be more effi- 
cient in the arts of life, and enjoy more of true welfare 
than he does. Communities which show no advance- 
ment in these respects are called dead, and decay is sure 
to follow. Prudence looks after all educational interests 
by expending wealth upon the means of education; not 



318 Rural Wealth and Welfare 

only sustaining schools, but making more permanent 
provision and increasing facilities for instruction. This 
is not only a means of preserving and wisely using the 
wealth accumulated, but a means of increased produc- 
tion. Such prudence suggests large endowments for 
public education, including the support of government 
machinery for uniformity of education. A similar pru- 
dence sustains the philanthropic spirit which maintains 
all the means of philanthropy. The endowment of 
asylums for the weak and afflicted and the support of re- 
ligious institutions are prudent ways not only of caring 
for present welfare, but of increasing the welfare of the 
future. The next generation will be stronger and hap- 
pier for the prudent foresight of this generation in over- 
coming obstacles to health and wisdom and virtue. 
To leave wealth thus invested is far better for succes- 
sors than to leave it in form for ready consumption upon 
temporary wants. Thus all prudent consumption of 
wealth has for its basis the genuine welfare of a contin- 
uous society of human beings subject to improvement. 
Any forming community looks surely to future welfare 
when it invests wealth in good homes, good schools 
and good churches. 



CHAPTER XXV 

IMPB UDENT CONS UMPTION 

Society interested in imprudence. — This fact, that the 
wealth of each generation is so largely dependent npon 
the prudence of the preceding, emphasizes the impor- 
tance of public sentiment in favor of prudential con- 
sumption. Public criticism naturally attacks the most 
noticeable failures of prudence, and it therefore seems 
worth while to consider some of those imprudent forms 
of consumption which society may seek to prevent. It 
is also proper to consider the ways in which society may 
act for prevention of imprudence. 

Luxurious consumption. — The question of luxury in 
the same society with extreme poverty is always promi- 
nent. Luxury is supposed to be extravagant expendi- 
ture in meeting individual wants. Though such wants 
may be real and legitimate, lavish expenditure by any 
portion of a community seems at first sight a trespass 
upon common welfare. Some have considered that per- 
son wanting in good will to his fellows who expends 
upon his own comfort more than his neighbors can 
afford. Others define luxury to be expenditure for liv- 
ing above the average expenditure in the whole com- 
munity. Still others regard any expenditure a luxury 
which is not needed to maintain physical powers. 

It is easy to see that all these efforts at definition are 

(319) 



320 Rural Wealth and Welfare 

imperfect, because the idea of luxury implies such a 
mode of life as does not contribute to the total welfare, 
and each one's idea of total welfare enters into his defi- 
nition of luxury. It is an evident fact that the so-called 
luxuries of oue generation become the actual necessities 
of the next. This is because the life of the race means 
more and includes more with each succeeding generation. 
To live in the twentieth century will mean, as it has 
always meant in the past, to have such exercise of every 
ability as circumstances permit. Luxury is therefore 
always relative to the duties one has to perform, as well 
as to the society in which one moves. Moreover, luxury 
is relative to individual abilities and individual plans. 
It would be luxury for a farmer to go without a needed 
plow for the sake of buying a lawn mower. It would be 
luxury for a student to own two coats, if he must go 
without a dictionary to buy the second. 

It is easy to settle the luxuries of others, but less easy 
to so define luxury that the public can agree in the defi- 
nition. In general, it is described to be a meeting of 
fanciful rather than real wants. Any individual in so- 
ciety is spending his wealth in luxury if he allows his 
imagination to conjure up adornments of person or 
household which contribute chiefly to display rather than 
to comfort or enlightenment. All such adornments of 
person, or home, or the public streets, as cultivate gen- 
uine taste and inspire to more of energy contribute to 
the general welfare far more than mere expenditure for 
food can do. Yet in times of starvation the food, must 
come first. The world sometimes sneers at the desire 
among very poor people to cultivate flowers and main- 



Luxurious Consumption 321 

tain a canary or other pets; yet every philanthropist 
knows that these desires are among the strongest in- 
centives to greater thrift and keener exertion. 

Legal restrictions upon luxury. — With all this diffi- 
culty in definition and the certainty of change from age 
to age, there is nevertheless a disposition on the part of 
society to restrict actual luxury. Again and again this 
has led to enactment of laws prohibiting expenditure in 
certain definite forms. The dress of ladies of rank has 
been restricted as to style and quantity of material and 
ways of making. The variety upon a dinner table has 
been limited to a certain number of dishes and certain 
kinds of food. 

All of these have been egregious failures, from the 
impossibility of measuring results upon the general 
progress of civilization. The indirect effects of in- 
genuity in dress and cooking have been on the whole so 
beneficial that the world cannot afford to hinder it. The 
intricacies of French cooking seem to an ordinary house- 
hold extreme luxury, yet fhat very ingenuity has 
cheapened the cost of living, to a large portion of the 
world, by rendering palatable the coarser vegetables and 
cheaper meats which lie within the reach of the poor. 

No real student of human nature would now attempt, 
unless it be in the emergency of a great famine, to re- 
strict expenditures by law upon the plea of luxury. 
Still, society as a whole has some voice in directing the 
judgment of individuals. Public opinion is an effective 
check upon desires. The good will of the multitude is 
more important to the mass of men than any particular 
gratification. It is proper, therefore, to discuss at any 

u 



322 Rural Wealth and Welfare 

time and at all times the limits of luxury, both for our' 
selves and for our neighbors. The sole cure for impru- 
dent expenditure in luxuries is individual culture ofi 
mind and heart and conscience, so that each may do his? 
best to secure, not only the good will of his neighbors, 
but their welfare. 

Waste ful. consumption. — Wasteful expenditure through 
ignorance or recklessness is more common and more 
weakening than luxury. Its limits cannot be described, 
since it covers expenditures of every kind, from the 
simplest provision for food and clothing to the most 
elaborate structures and wildest schemes of develop- 
ment. Though noticeable wastes are seen in the house- 
holds of the rich, they are relatively larger among 
the poor. 

Yet any attempt to regulate such waste by law is 
futile, chiefly from the fact that it ignores the personal 
responsibility and wants which make individual charac- 
ter. It is properly applied to the imbecile and the in- 
sane, as well as to children and youth, through the 
appointment of a prudent guardian. Society can pro- 
tect itself only by fostering more complete systems of 
education in the arts of life. The tendency of our times 
toward a more technical education, especially in reference 
to the home and the common industries of life, marks 
the growth of public opinion toward a clearer ideal of 
prudence against waste. The study of economic prin- 
ciples in every department of life, and especially the 
clear understanding of everyday facts as to the things 
men handle and use, cannot but give wisdom for pre- 
venting waste. 



Vicious Consumption 323 

Vicious consumption. — It is customary to distinguish 
from all other forms of imprudent consumption of 
wealth such vicious indulgence of appetites as not only 
consumes accumulated wealth but diminishes power in 
production . Such vicious indulgence is the result of 
cultivating unnatural and destructive appetites. Famil- 
iar illustrations are those connected with the drink habit, 
the opium habit, or any other vice whose chief effect is 
seen upon the individual life of the one indulging him- 
self. These involve the very highest wastefulness, be- 
cause they destroy not only wealth, but ability. Nobody 
can begin to compute in terms of money the actual 
waste of our country through indulgence in strong 
drink. The value of liquors consumed is no measure of 
the entire wastefulness. Yet this is more than enough 
to furnish all with bread. 

The wrongfulness of such indulgence, from its harm 
to society through reducing the power of the race, is 
seldom disputed. Yet the right of society to restrict the 
individual indulgence is quite generally disputed. The 
larger need of freedom in the exercise of judgment 
among mature members of a community outweighs the 
need of preventing even vice. Society does well to bring 
the restraints of law upon the immature, whose judg- 
ment is not yet formed, thus supplementing by law the 
directive energy of parental control. It may yet go 
further, and prohibit such indulgence to all who have 
lost the power of self-control. But in general it has 
been found impossible to enforce restriction upon vicious 
indulgence except where such acts occasion direct suffer- 
ing upon others, or help to maintain an immoral busi- 



324 Rural Wealth and Welfare 

ness. The right of restraint and constraint, even to 
prohibition, of that which fosters vice and extends its 
range mnst be admitted by all thoughtful persons. Still, 
the right to prohibit and the power to prohibit are not 
identical. The only sure preventive is early education 
of public conscience through the training of youth to a 
clear understanding of the vicious practices and their 
relation to the poverty and weakness and crime of 
humanity. 

Destructive consumption. — A more obvious trespass 
upon prudential consumption is criminal destructiveness 
of every kind. Until society outgrows a condition in 
which fraud, theft, robbery and murder must be 
warded off by locks and bars, by immense bodies of 
policemen and armed militia, its wealth cannot be wholly 
invested for welfare. The possibility of such crimes as 
arson or train obstruction and destruction shows the 
condition of the best of modern communities to be far 
from ideal. Nobody pretends to measure the actual 
waste in society resulting from such criminal purposes. 
It extends to almost every detail of production and 
trade, and occupies a large portion of the inventive and 
executive energy of the people. Organized society at- 
tempts to restrain such waste by its police force, or by 
restraining laws and injunctions enforced by severe 
penalties. Every honest man is financially interested in 
the conviction of every knave. Sympathy with fraud, 
even in trifles, is contributing toward such destructive 
waste. 

In this connection the enormous expenditure in main- 
tenance of standing armies and navies for the protection 



Destructive Consumption 325 

of national boundaries is of special importance. Reduc- 
tion of this waste of wealth and power should be de- 
sired by every class of society , Though war has been 
the means by which human liberty has grown, it has also 
been the means of crushing it. It would seem that 
every incentive is offered each citizen to make an appeal 
to arms and the maintenance of armies a most remote 
necessity. Yet it seems that the mass of men of every 
rank are tenacious of national honor. While most com- 
munities have abandoned the duel as both wasteful 
and immoral in personal difficulties, the spirit of the 
duel is still rife in the differences between- nations. A 
clearer perception of mutual interests in national wel- 
fare will bring nations, like individuals, to accept some 
method of enforcing neutral judgment for settling dis- 
putes, in place of war. The farmers of a country, be- 
ing nearly 50 per cent of its people, and bearing a large 
proportion of the expense of armies and wars, have a 
tremendous interest in maintaining peace. This can be 
done not so much by reducing the provision for armies 
as by cultivating the spirit of fair settlement, against 
the false patriotism which claims everything for one's 
own nation. 

False notions of waste. — Wasteful expenditure and 
luxury and possibly even vicious indulgence are often 
excused with the plea that expenditures of this kind 
make employment for labor, and so aid the poor. While 
it is true that multitudes are employed in catering to the 
vices of others, all must grant that the same wealth 
might be much better employed in other occupations. 
More than that, the larger wealth resulting from accumu- 



326 Rural Wealth and Welfare 

lation in place of waste would provide capital needed for 
fuller employment of all who can work. All imprudent 
expenditure reduces the power of society to accumulate 
wealth for giving occupation to all who will work. 
Moreover, such wastefulness creates a tendency toward 
thriftless character among the people. The welfare of 
the whole community depends upon the thrift of the 
whole community. The thriftlessness of rich men's 
sons is more damaging than the thriftlessness of tramps, 
because it is more tempting to others. Any man who 
lives simply to spend, however busy he keeps himself, is 
one of the wasteful ones in the community, unless he 
has some higher object than gratifying his desires. The 
energetic idler may be doing his worst for the com- 
munity without being ranked as a spendthrift, because 
he makes such idleness respectable. It should be the 
desire of all good citizens to increase the ability of every 
other citizen, not only to live, but to live well. This 
thriftlessness can be overcome only by a strong public 
sentiment that corrects the early tendencies of youth to 
waste of means and energy. 

Waste in rivalry. — There is another kind of wasteful- 
ness resulting from excessive competition for a particu- 
lar business or a particular trade. Immense amounts 
are expended upon rival advertisements, all of which 
enter into the general cost to consumers. A multitude of 
retail dealers maintain stocks of goods entirely out of 
proportion to the needs of the community, because they 
are rivals in trade. Very likely the business rents are 
higher than they need be because of such rivalry. Not 
only is there a strong competition for a place, but also 



Waste by Middle Men 327 

for showy equipment and elegance of display. All this 
could be saved by better organization. A still more evi- 
dent waste is from the multiplication of agents and 
middle men of all kinds, employed simply in catching 
trade. Some of them act simply as interlopers, hoping 
to gain a small commission without the use of capital or 
painstaking in their business. These are the useless 
middle men maintained at the expense of the community. 
Full market reports and general information of buyers 
and sellers greatly reduce such waste. 



CHAPTER XXVI 

SOCIAL ORGANIZATION FOE CONSUMPTION 

Individualism. — While the social organization is nec- 
essarily thought of as a group of individuals, whose 
individual wants and plans and growth and character 
must be the chief incentive for action, it is necessary to 
avoid the extreme of individualism. In escaping from 
the false analogy implied in considering society an or- 
ganism, there is a tendency to make the individual not 
only of final importance but independent of association. 
Excess of competition is represented in the maxim, 
" Every man for himself." In the effort to carry out this 
maxim and in opposition to restraints of society, wheth- 
er by law or by custom, many are led to advocate an 
abolition of organization, leaving all welfare to be se- 
cured by appeal to the individual judgment and con- 
science of men. It is true that back of all law is the 
law of righteousness in individual souls. 

Under the name of "autonomy" theorists propose to 
appeal to this conscience of individuals, making every 
soul a law to itself. Such theorists assume that every 
human being will be wise and virtuous, or take the 
consequences of his failure. They forget that all or- 
ganizations for constraint are a part of the natural 
consequences of failure in self-control. 

(328) 



Individualism 329 

Under the name of "anarchy" groups of people all 
over the world have united to destroy what they consider 
arbitrary rules in government. Anarchists differ from 
autonomists in putting foremost the destruction of exist- 
ing governments. Their ideals of right and wrong and 
their methods of individual action for individual welfare 
are left for the future to develop, after the rule of the 
present has become no -rule. Their present organiza- 
tion, as far as it is public, appears to be, in almost direct 
contradiction of their principles, an absolute despotism. 
The same idea has gained followers in some countries, 
particularly in Russia, under the name of "nihilism." 

While in some instances such movements may be but 
a natural reaction against tyranny, the view of human 
wants and human welfare which all these advocates pre- 
sent is far from being correct. The grand economic fact 
that groups are superior to individuals in actual efficiency 
is beyond dispute; and it is equally true, though not so 
often stated, that groups gain greatest satisfaction for a 
given consumption of wealth. It is only when great 
numbers share in satisfaction that the highest range of 
wants can be gratified. Moreover, even individual wants 
are largely social. Each finds his highest pleasure in 
the society which nature has provided. The chief 
reasons for accumulating wealth are in what men can do 
for each other. Any individualism which overlooks 
these principles is opposed to welfare, and so self- 
contradictory. 

The famous French phrases, " laissez faire" and 
" laissez passer," which represent the individualistic side 
of economic theory, are often extended beyond the in 



o?'"' 1 rwl fTecritf mi WeQ - 

tent of the phrase makers. They mean essentially, let 

do, let go, and have their proper application in an ap- 
peal : inservative 9C ietytc so modify laws and Bas- 
ils that individual enterprise, ingenuity and thrift 
shall be stimnlaled to ::^ best by freedom. Freedom 
from restrictions in right -doing. Tinder the evident mo- 
tive furnished by general "welfare, is an ideal for society. 
In economic directions it has great importance. No 
thinker can fail to see the trend of civilization toward 
snch freedom. So far in the history of the world the 
enlargement of individnal responsibility, by freedom 
from constraint among the mature member- :: society, 
has been the chief mark of progress . Yet the constraint 
of welfare, and of the general judgment as to whai is 
welfare, as well as the necessity for agreement as :: 
ways and means of reaching it. are better recognized 
today than ever before. The extreme of individnalism 
lesti jys the natnral constraint of a common jndgment. 

>:■ sialism. — The opposite extreme is the assumption 
that common wants are of snpreme importance and com- 
mon jndgment absolutely efficient. Under the name : 

:_mnnism " it stands in direct contrast with anarchy. 
Anarchists and communists may unite upon a platform 
of a single plank, opposition to existing institution-: 
but in all ideals and purposes and plans for future wel- 
fare they are absolutely opposed to each other. The 
natural community of intereste si evident in society 
gives a fair basis for the general principles of com- 
munism. Xo doubt the welfare of all is the interest of 
each, and the world is growing fct _:iize it. Among 

a group of beings perfectly wise and virtuous there 



Socialism and Collectivism 331 

could be no clashing of either interests or judgment. 
The ideal of Louis Blanc, " From every man according 
to his powers, to every man according to his wants," 
would represent the natural activity of such a group. 
But in application to humanity, as it is and is bound to 
be by its weakness and waywardness, it seems abstractly 
ideal. In fact it is only roughly applicable in ends to be 
served, and suggests almost nothing as to ways and 
means. Like the golden rule, it applies to the disposi- 
tion and purpose of the actor, but leaves the acts to be 
decided by individual judgment. 

The numerous phases of opinion in application of 
this principle cannot be presented even by name in this 
short chapter. They are worthy of study as indicating 
a growth of opinion and sentiment in recognition of the 
mutual dependence of all human beings. They are also 
worthy of study as indicating how arbitrary a zealot may 
become in enforcing his opinions upon others. All of 
them are grouped somewhat loosely under the name of 
"socialism,' 7 but there are many gradations in the 
supremacy of the social ideal over the in-dividual wel- 
fare. There are also many shades of opinion as to how 
the final result of social supremacy shall be reached. 
Many are expecting a revolution by force of arms to 
establish the ideals of the leaders. More are oppor- 
tunists, snatching every opportunity in legislation, in 
decision of courts, and in executive power, to apply 
their methods. 

Under the name of "collectivism" appeals are made 
to the multitude to combine their energies under leader- 
ship : first, to overcome present restraints; and then to 



332 Rural Wealth and Welfare 

secure combined action in all modes of production and 
consumption. "Nationalism" is more familiar to our 
thought in the United States, as embracing the aim of a 
somewhat noisy party to bring about the compulsory 
organization of all industries under the control of the 
nation, even to placing all property and all methods of 
consumption under an official despotism. 

- Few recognize the actual logic of their views as com- 
pelling complete subjection of every individual to others' 
judgment, and fewer still have any idea of the official 
machinery needed for such control. The great majority 
are satisfied in seeing evils which might be cured by 
greater social accord, expecting at once to vote into ex- 
istence the necessary machinery. Most of these are mis- 
led into considering wealth and its uses to be the chief 
elements of welfare. They forget that wealth is only a 
means of accomplishing one's purposes toward his fel- 
lows and himself. The greed of power and position and 
praise are far stronger as evil motives than greed of 
wealth. If wealth were distributed by omniscient wisdom 
and power according to the maxim of Louis Blanc, the 
higher welfare would still be as far away as ever, unless 
the same omniscience should control all actions. Such 
control by outward force would banish the very idea of 
virtue, the highest of all welfare. 

It is easy to see that every form of socialism, in prac- 
tical methods, involves a leveling process inconsistent 
with human nature and its surroundings. Equality of 
environments is possible only by reducing all to the 
lowest condition. Equality of aspirations reduces all 
toward the most brutal of the race. Even equality of 



Socialistic Ideas 333 

efficiency reduces all to the power of the least efficient. 
So the whole range of method, assuming equality of 
wealth as important to welfare, lowers the welfare of the 
whole by destroying the best abilities and the best 
capacities for enjoyment in order to prevent inequality. 

And yet it has not been proved that equality in any 
of these particulars is desirable. It is equally beyond 
proof that actual equality is possible. The most abso- 
lute communism implies the greatest inequality in official 
power. Even the pleasing phrase, "Equality of oppor- 
tunity," will not bear analysis as applied to human 
nature and human welfare, under the very highest ideals 
of social unity. Indeed, the lesson of facts in all ac- 
tivity is that inter -dependence of unlike and unequal 
forces makes the true unity of organization, and the 
surest welfare of multitudes. That each individual 
should have the best opportunity possible for his own 
development is best for each and for all in a community; 
but that such opportunities shall be equal in any other 
sense no wisdom can contrive. Most socialistic theories 
presuppose almost immediate change of human nature 
under the new form of administration. But for this 
supposition there is little ground in the history of the 
race or of all nature. Growth there will be, and evolu- 
tion of ideals: but the administration grows out of these, 
instead of being their cause. 

Socialistic tendencies. — Socialistic theories gain ad- 
herence under the provocation of certain tendencies in 
society. First, they appear whenever by oppression or 
fraud of any kind a community is made up of one class 
possessing wealth directly opposed to another class with- 



334 Rural Wealth and Welfare 

out wealth, with no extended middle class, and therefore 
with no ready means of transition from one class to 
another. As long as the doors are open for real progress 
in power of accomplishment, all the way from poverty to 
wealth, society has a unity in its variety that is better 
than any communism promises. At present in our own 
country, with the great multitude of farmers' families 
furnishing not only the necessities of life, but the larger 
part of human energy that goes into every calling and 
every rank, socialism does not appeal to any large num- 
ber. An earnest, thriving farmer's family will never 
believe advantage to come either to themselves or to the 
race by making them all practically mere wage -earners. 

Second, a common cause of socialistic views is separa- 
tion, under extreme division of labor and opposing 
organizations sustained by it, of the workers in very 
distinct fields of Jabor. The jealousies arising between 
these classes, or guilds, or between employers and em- 
ployed, foster the revolutionary spirit which jumps at 
any promise of relief from unsatisfactory conditions. 

In the third place, a political revolution, if it has de- 
stroyed landmarks of the past and any natural sen 
timents growing out of social relations, leaves a mass 
of people at sea with reference to the nature of rights. 
Under such circumstances socialism offers an apparent 
solution of difficulties unprovided for. Though any 
practical effort to apply these theories under such cir- 
cumstances usually results in despotic assumption of 
authority by a few, the people are moved by the pleasant- 
sounding phrases. If, in the settling of social affairs 
after a revolution, an earnest effort is made to agree upon 



Socialistic Tendencies 335 

set phrases embodying principles of constitutional 
liberty, the chances are in favor of some sweeping state- 
ments, too general to control action, but over-emphasiz- 
ing individual rights in comparison with individual 
duties. Action under these declarations usually con- 
forms to the necessities of the case, accepting the im- 
mediate welfare of the society as a guide to more 
complete welfare. 

All these conditions are abnormal, wholly unfavor- 
able to a fair consideration of what will promote welfare. 
Even if socialistic methods might work fairly well when 
all were favorably disposed, there is great question 
whether they would work as well as present social 
methods, under equal good will. It must not be forgot- 
ten that every scheme of nationalization, for its own 
sake, implies the government of every individual by 
everybody else, thus hampering under^ petty regulations 
and by force of multitudes the growth of every in- 
dividual. No scheme for national direction provides as 
natural tests for merit, ability, enterprise or necessity 
as present methods are known to do wherever fraud and 
tyranny are abolished. 

Cooperative consumption .—In the natural order of so- 
cial development there is room for much more general 
association in the consumption of wealth than we some- 
times think. The world has made great progress in this 
direction during the last fifty years, through voluntary 
organizations for prudent expenditure. The only limit 
to such community of organization for special purposes 
is in the nature of the work and the relation of the 
workers. Cooperative stores, banks, building and loan 



336 Rural Wealth and Welfare 

associations, laundries and even kitchens are within the 
range of actual experiments. We have already seen how 
such cooperative interests may operate in simple invest- 
ment of capital for production. The chief obstacles in 
them all are the lack of certain characteristics of pru- 
dence in a multitude. In general the best management 
does not accord with the judgment of the mass. 

- A few brief maxims may indicate the natural restric- 
tions upon such methods. Cooperative consumption is 
successful: first, where those cooperating are fairly 
equal in wants and abilities, or closely related through 
kinship or friendship; second, where the range of coop- 
eration includes common wants; third, where no one is 
given the advantage of credit; fourth, where mutual 
confidence selects and sustains a continuous manage- 
ment; fifth, where frequent and full reports can make 
the business plain to all concerned. It would be in- 
teresting to follow the growth of cooperative stores and 
banking associations from small beginnings to enormous 
enterprises, but the limits of this volume will not 
permit. This extension may be realized from the state- 
ment that the Rochedale cooperative societies of England 
now number nearly two thousand, with more than a 
million members and nearly seventy -five million dollars 
of capital. 



CHAPTER XXVII 

ECONOMIC FUNCTIONS OF GOVERNMENT 

Governmental limits. — All society recognizes certain 
universal wants and the necessity of meeting these with 
essential order and the best economy. These universal 
wants enforce the organization of society under some 
form of government. Such an organization grows out of 
the necessity rather than the will of humanity. Hence 
government, local or more general, is the direct effort of 
individuals in society for the general welfare. Usually the 
best test of general welfare is the assent of the majority 
of mature and intelligent members of the community. 
In the history of the world, however, the importance of 
the object to be gained has overcome obstacles in the 
will of the governed as much as any other. Among 
children the right of the parent to govern for the welfare 
of the family is never questioned until character and 
wisdom are doubted. Among crude and disorganized 
bodies of people, superior wisdom and earnest purpose 
make leadership. Yet always, in the end, the ideal of 
welfare in any community implies growth of individuals 
into authority over themselves 'as one of its main objects, 
if not its chief one. Thus the best government for any 
community at any stage of its advancement is the one that 
best secures the welfare of all in existing circumstances. 

y (337) 



338 Rural Wealth and Welfare 

It must be remembered that the chief elements of 
welfare are above government. All the kindly affections 
which make the chief bonds of society are to be culti- 
vated by good government, but cannot be forced by any 
law, either positive or prohibitive. Individual character 
in all its proportions is individual growth, which can be 
fostered but not forced. All the catalogue of virtues is 
made up of elements of character, not one of which can 
be made by force. So government of every grade fosters 
the highest welfare of individuals by sustaining virtuous 
motives and restraining vicious ones, or rather by en- 
couraging right action in its enjoyment of welfare and 
restraining wrong action by deprivation of welfare. 
Government, therefore, is best when its aims are dis- 
tinctly confined to universal welfare. The distinctly 
personal wants can be best provided for by affording the 
best conditions for free exercise of individual powers. 
Governments can never wisely do favors for a class, 
since such favors weaken the power of government for 
promoting general welfare. What government does for 
any it needs to do for all. What it does for all it must 
secure to each in fair proportion. In any effort to ex- 
tend the range of governmental action this natural limit 
of universal welfare for individuals must be considered. 

Ends of government. — In this view of the reasons 
for organized government and its natural limits, certain 
universal wants can be clearly perceived. Most obvious 
is protection against external foes, personal or material. 
This universal need, in the presence of personal ene- 
mies, is so plain as to make the crime of treason noto- 
rious. The internal peace of society is just as evidently 



Ends of Government 339 

a universal necessity, and so any infringement upon the 
order of society, as agreed upon either by express 
statute or by the common law of established precedent, 
is punished as a crime against all. Personal violence, 
even in the shape of private vengeance for wrong done, 
is a menace to internal order, and so a crime against 
the whole organization. The mutual dependence of 
each upon all and all upon each in every-day transac- 
tions enforces the interest of the organization in per- 
sonal contracts, and makes the government a partner 
with every right -doer against every wrong -doer in all 
attempts at fraud or abuse of power of every kind. 
This guardianship of personal freedom makes necessary 
the bulk of criminal law and most of the machinery of 
courts. The arbitration of disputes between interested 
parties is a natural sequence of the effort to prevent 
violence. Government does not and cannot right 
wrongs ; it barely saves a remnant of good to the 
individual wronged, and furnishes a warning to others 
against future wrong. 

Universal needs. — Every force, external or internal, 
which is likely to be injurious to the whole community, 
the whole community through its organization is obliged 
to combat. Hence the necessity for quarantine against 
infectious diseases wherever found, and provision 
against destructive storms wherever possible. Protec- 
tion against the ravages of insects falls into the same 
list, and so does every safeguard in which the whole 
community is interested. The same principle applies to 
positive provisions for welfare in economical ways of 
meeting universal wants. The universality of the need 



340 Rural Wealth and Welfare 

makes the water supply and the lighting of cities a 
proper work for the city organization. If the same ma- 
chinery can provide most economically for larger per- 
sonal wants without infringing upon the rights of all, 
simple economy invites it, and the principles of good 
government sustain it. The question of municipal 
lighting is simply one of true economy for the entire 
body of citizens. 

For the same reason, that everybody needs it, the 
government is obliged to have control of the means of 
transit so far as ease and safety and economy to all 
require. Government must maintain highways suited 
to the needs of the community at all stages of its devel- 
opment. The question of city management of street car 
lines, beyond such control as secures safety and essen- 
tial justice, is purely one of economy for all con- 
cerned; that is, for the entire community. This econ- 
omy is not settled for one community by the conditions 
of any other. It must be decided in each community 
whose interests are to be served by the actual need and 
abilities of that community. 

The same may be said in regard to all methods of 
providing ready communication of wants and abilities 
as needed for mutual welfare. The postal system is a 
natural government machine, because every citizen 
needs to be within reach of every other citizen in the 
same community. If government does not furnish the 
machinery, it must control it to the same end. The 
extent of the machine must be decided by the extent of 
the want. If the want is sufficiently universal, the 
organization cannot avoid providing the machinery. 



Universal Needs 341 

This principle applies to every form of communication 
devised or discovered. The question of government 
ownership of telegraph or telephone connections be- 
comes one of simple economy, whenever the community 
finds such means of communication a matter of uni- 
versal want. If economy or vested rights of individuals 
prevent such provision, government must still guard 
these universal interests by inspection and control. The 
exact point where government ownership becomes eco- 
nomical and legitimate must be decided by a careful 
weighing of the general interests of the whole com- 
munity. 

Universal education. — The necessity for universal 
intelligence is so evident that governments not only 
recognize and foster benevolent efforts of individuals 
for education, but rightly make the organization itself 
a direct force in maintaining educational institutions. 
Public schools are now universally recognized by most 
enlightened people as meeting a universal need, and 
therefore one of the essentials of good government. 
How extensive such provision should be is still an un- 
settled question. In fact, it can never be finally settled 
in any growing community, because the universal need 
of the community becomes more and more extended. So 
far as universal intelligence depends upon the higher 
intelligence of leaders in the community, the whole 
mass is interested in the training of that higher intelli- 
gence. The very nature of education, shedding its light 
over all in its neighborhood, makes every member of the 
community a sharer in the advantages of university 
training. Hence governments rightly and economically 



342 Rural Wealth and Welfare 

administer educational systems which involve the wel- 
fare of all. The same responsibility makes improper 
the use of public funds in support of private institu- 
tions without such restrictions as insure the good 
of all. 

The propriety of governmental control of churches 
and religious training must rest upon the same basis of 
principle. Religion is of such a personal nature, so 
wholly a matter of conscience, that it cannot be said in 
any proper sense to be universal. Yet the need of 
religious sentiment and freedom in development of that 
sentiment is universal. The state does well to provide 
security for religious thought, practices and fostering 
influences in all governmental machinery. On this 
ground the civil law protects a Sabbath. The state 
church has had its apparent reason for existence, and 
still has in many parts of the world, from the close con- 
nection between religious training and popular educa- 
tion. Naturally state churches emphasize the educa- 
tional side of religious institutions. The world is 
coming to see more clearly the dividing line between 
information or thought about religion and religious 
action in faith, its common basis, and can leave the 
latter for individual growth. 

Government wards. — The welfare of the whole reaches 
finally to a guardianship over such individuals in the 
community as endanger, either by weakness or by 
wickedness, that welfare. For this reason government 
can maintain asylums for the weak or diseased, or even 
the extremely ignorant, not simply to protect these in- 
dividuals, perhaps not chiefly for that purpose, but to 



Government Wards 343 

protect the whole. It can rightly and wisely enforce 
such protection by health regulations and officers, and 
by truant laws and officials. Upon this principle it may 
rightly constrain even the friends of insane persons to 
give up control of the insane to the safer public provis- 
ion in asylums. When any community realizes a similar 
need with reference to inebriates, it will assume the same 
constraining authority. 

In dealing with the problem of personal wickedness, 
a community must still draw the line between universal 
and individual welfare. The criminal injures all; 
therefore all must constrain him, and effort is made to 
measure that constraint by the evidence of opposition to 
public welfare. Vices are more distinctly individual. 
They touch the universal welfare in those forms which 
propagate vice in neighborhoods. Governments univer- 
sally fail to enforce laws against personal vices wherever 
the danger to upright character in other persons is not 
clearly perceived. All restrictive legislation upon 
vicious habits, like intemperance, gambling or other 
immoral practices, is naturally aimed first at the places 
contrived to foster such habits, and therefore to attack 
the innocent. The actual working of such legislation in 
preventing the growth of vice is the only final test of its 
wisdom. What it can do is what it ought to do. In 
general the actual public sentiment in local communities 
must be the main dependence for executing such laws. 

Protection of the weak, — The common statement that 
government must protect the weak against the strong is 
subject to the same principle of universal welfare, and 
is applicable only where society has definitely recognized 



344 Rural Wealth and Welfare 

rules of good order which somebody is violating. Any 
attempt to supply to the weak a strength which they 
cannot wield is necessarily a failure. But society as a 
whole rightly shields children and youth, and even 
women of mature years, from burdens which may injure 
the general health or wisdom or virtue of the com- 
munity. Laws prohibiting contracts which involve such 
burdens can be enforced so far as the community appre- 
ciates the evil of such contracts. So, to a certain extent, 
weakness from ignorance may be protected by any 
method that tends to remove the cause of weakness. All 
such action of government must be carefully guarded 
against becoming such a protection as will render the 
weak weaker. 

Public responsibility. — The organization of commu- 
nity is best for the mass of the people when all de- 
sires are allowed to give their proper impulse to ac- 
tion, and when every enterprise is encouraged by freedom 
until it is seen to infringe upon the general welfare. 
Any system of government which checks natural im- 
pulses and hinders individual enterprise, without clear 
evidence that all must suffer from such freedom, is 
harmful. The genuine application of the phrase 
"laissez faire" is in giving honest efforts free course, 
because these efforts secure the largest good. It really 
means, leave humanity free until injury is attempted. 
In general, government has to deal with all necessities 
which are identical throughout the community. Pro- 
vision for those necessities and those only it is bound 
to make. 

All questions of nationalization of industries or of 



Public Responsibility 345 

community consumption must be brought to the test of 
universal need. What the whole community wants the 
whole community has a right to provide in the way 
which brings most good with .least expenditure of exer- 
tion in any form. No other question can outweigh in 
importance this one of public need or public welfare. 
Every producer and every consumer is interested in see- 
ing that such welfare is not overlooked by the public, or 
infringed upon by any individual or combination of in- 
dividuals in his community. This must be done by 
emphasizing personal responsibility, even in public en- 
terprises. For the statement is beyond dispute, that the 
attempt to substitute corporate responsibility for per- 
sonal responsibility ends in no responsibility at all. 
Above all things it is necessary to remember that all the 
progress yet made from the starvation and degradation 
of barbarism has been by organized interest of the whole 
community in protecting first individual life, second in- 
dividual liberty, and third individual property, as the 
foundation of universal welfare. Yet society holds all 
these rights of individuals subject to the same higher 
law of welfare by restricting the purpose of individuals 
when possible, and action always, if it opposes the 
total welfare. 



CHAPTER XXVIII 

ECONOMIC MACHINERY OF GOVERNMENT 

Resources of government. — All expenditures of gov- 
ernment are as subject to economic laws with reference 
to consumption of wealth as are those of individuals. 
Actual result in welfare is the only reason for such 
expenditure. Hence the same tests of economy are 
applied. Government makes but few expenditures for 
the immediate purpose of reproducing and increasing 
wealth. So far as its investments sustain productive 
industry, and the products of that industry enter into 
the world's market, they are subject to the same 
economic laws of supply and demand that govern all 
production of wealth. If in any case they are not, it 
is because of government monopoly cornering the 
market, or because of unnatural conditions of govern- 
ment production undermining the market. In general, 
government is simply expending for the common welfare 
a part of the wealth produced by individual effort. 

Its resources are in small part derived from fees for 
special services rendered to individuals of the commu- 
nity. Such are fees for registration of deeds and mort- 
gages, and of the same nature, though for convenience 
of collection paid in a different way, is the revenue from 
sale of postage stamps and stamped envelopes. Eevenue 

(346) 



Resources of Government 347 

may come from pay for certain special privileges or 
franchises established by license or patent. These are 
supposed to be not so much in payment for special 
service as for sharing in responsibility and cost of pro- 
tection. Another source of revenue is in the shape of 
money penalty, or fine, for minor trespasses upon good 
order. Such revenues are accidental, and diminish as 
the government becomes more perfect. Under peculiar 
circumstances of opposition by citizens or bodies of 
citizens to the general order, government confiscates 
property used in such opposition. A good illustration of 
this is connected with smuggling, where the introducer 
of foreign goods opposes government in its revenue laws 
|by fraud or violence, and suffers the confiscation of 
goods so introduced. 

None of the foregoing sources of revenue, unless it 
be the license, and this is sometimes a mere method of 
taxation, can serve to any great extent the purposes of 
government. All government expenditures for general 
welfare must finally be met by some system of distrib- 
uting the burden over all the people. This method of 
distribution is called taxation. The principal revenue 
is raised by taxation of possessors and producers of 
wealth, in anticipation of current public needs. 

If for any reason government expenditures exceed 
its revenues, the government, like any individual, be- 
comes a borrower. It may borrow by contract to pay 
at some future time for construction of buildings or 
machinery, or by issue of scrip in the shape of promises 
to pay at some definite or indefinite time in the future, 
or more distinctly still by sale of bonds, which are 



348 Rural Wealth and Welfare 

definite certificates of indebtedness, negotiated like th 
notes of individuals in great banking centers. Yet al 
of these are only methods of postponing the taxation 
which must support the government in its necessar 
machinery. Government can live upon credit in thi 
same way, and only in the same way, that individual! 
can. The economic reasons for such credit must be tht 
same as in individual experience. 

Principles of taxation. — Since taxation in genera 
is simply a way of distributing expenses to those foi 
whose benefit expenditure has been made, the first ques- 
tion is one of fairness in distribution. The benefits 
from government expenditure ought to be universal, bull 
are not necessarily equal. Like all the good things of na-i 
ture, the benefits of the government are not appreciated" 
by all alike. No one would probably suggest the possi-i 
bility of distributing the expenditure exactly in accord 
with advantage received. Wherever the service is dis- 
tinctly personal, as in the regular mail service, an 
attempt is made to charge each person the average cost 
of the service. Even the large miscellaneous mail dis- 
tribution at less than cost may be fairly borne by those 
who use the mail for personal advantage, since this is 
likely to be in proportion to the intelligent activity; 
shown in correspondence. Some few taxes upon special 
commodities of questionable advantage to the multi-i 
tude, like liquors and tobacco, are supposed to be paid 
by those who gain the only advantage received by any- 
body in protecting their use. 

Some more general principle, however, must be 
found for adjusting the burden of general expenses so 



Principles of Taxation 349 

that each individual will bear his share. If the burden 
belongs to all, it should rest fairty upon all. Hence 
squality is usually given as the first principle of taxa- 
tion. But it is evident that in this case equality means 
squity, not a mathematical division by the number of 
taxpayers. The interpretation is therefore "according 
h ability." According to Professor Rogers, the student 
}f economic history, "Equality of sacrifice is the only 
Jionest rule in taxation." This means, in practice, that 
my system of taxation should be planned with distinct 
effort to distribute the common expenses according to 
the ability of different members of society to meet 
ijhem. 

It is evident that no exact gauge of ability is at 

band. If the actual income of every citizen could be 

I 

listmctly known, and the burdens of a dependent house- 
bold clearly expressed, a basis for equal sacrifice, so far 
as wealth is concerned, might be reached. But no such 
basis has been or can be actually found. If found, it 
would not give an accurate gauge of sacrifice, because 
the actual wants for comfort of different individuals are 
go widely varied. Two distinct approximations toward 
this equity are found. The first is in the total annual 
consumption of the individual taxpayer, especially of 
such articles as meet wants above the mere maintenance 
of healthy existence. In this the government assumes 
that all will spend according to their ability. The 
second is in a total accumulation of property. In this 
the government assumes that every man saves for future 
consumption all that he gains above his present needs. 
Both assumptions are untrue in individual cases, and 



350 Rural Wealth and Welfare 

only approximately true anywhere. In many instances 
the expenditure of a given year upon more continuous 
wants than ordinary, like a home or farm buildings, will 
count also as wealth laid by. So, in any combination of 
the two systems of taxation, the more thrifty and far- 
seeing will bear a double burden. Yet even this com- 
bination may not transgress the rule of equity, since 
such foresight is itself proof of ability. 

To this first principle of equity we may add others, 
less fundamental, but equally important in practice. 
Taxes must ~be sufficiently definite to be understood and 
provided for by every taxpayer. This is needed for 
maintaining the interest of every citizen in both the 
necessity and the economy of public expenditures. 
Taxes must be so levied and collected as to be conveniently 
paid. This means that private enterprise shall be 
hindered as little as possible in making assessments, 
and that times and places of collection shall be suited 
to the convenience of taxpayers. The collection of taxes 
must be by such methods as will involve least outlay, either 
in salaries of officials or in machinery of the collecting 
process. These four principles of taxation were an- 
nounced by Adam Smith more than a hundred years 
ago, and have commended themselves to students of the 
subject ever since. It is evident that the last three are 
more explicit methods for carryiug out the first. Most 
briefly stated, they imply equity, definiteness, conve- 
nience of paying, and economy in collecting. 

Most legislation with reference to taxes shows some 
effort to carry out one, if not all, of these require- 
ments. It is evident that a tax mav be convenient! v 



Direct and Indirect Taxes 351 



paid in connection with ordinary expenditures, and at 
the same time be very indefinite and quite inequitable. 
Many taxes upon articles of every -day use in the home 
are of this nature. A very equitable tax may be so 
inconvenient from its interference with private interests, 
and require so many officials for collection, as to make 
it a serious burden to all- Such a tax would be one 
levied upon net income, supposing it possible to discover 
the exact facts for such a levy. Taxes levied without 
consideration of these principles are defended as means 
of checking extravagance or vice, as equalizing other 
conditions of welfare, or as correcting inequalities from 
other existing methods of taxation. Even these last 
assume the necessity of equity in the entire system or 
group of systems. 

Direct and indirect taxation. — For convenience of 
study, taxes are spoken of as either direct or indirect; 
that is, a tax may be levied upon one whose property or 
earnings must be reduced by the amount of the tax, or 
a tax may be levied upon one whose property when sold, 
or whose service when rendered to another, will be worth 
as much more as the burden of the tax he has paid. A 
poll tax, an income tax, a tax on the farm, or a tax on 
household goods and jewelry, is assumed to be paid by 
the owner or user, without reimbursement. But a tax on 
stock in trade — like the farmer's live stock — or upon 
the machinery of production or service — like railroads, 
insurance companies and banks — is assumed to be 
transferred as an additional expense to the one who 
finally enjoys the wealth. 

It is easy to see that such a distinction is difficult. 



352 Rural Wealth and Welfare 

Every owner of wealth will consider taxes connected 
with its possession a part of the cost of snch wealth, 
and wherever possible in the conditions of the market 
will connt a tax in the selling price. It is impossible to 
judge from the form of wealth or the nature of the ser- 
vice when the tax can be transferred to a final user. A 
farmer's wheat may be the source from which he pays 
the total cost of raising it, including taxes upon the land 
employed. If, in the condition of the wheat market, he 
has still a profit upon his management, he will assume 
that the wheat buyers have paid the taxes. If the 
market price is so low as to not cover the cost, he will 
emphasize the fact that he pays the taxes. Yet prob- 
ably the fact is the same in both cases, that the owner of 
the land has his profits diminished by the actual amount 
of the tax. More strictly, the tax is taken from the 
rent of his land. In any case of over-production, when 
land gives no rent, the tax will be paid by the producer 
out of other income. So far, however, as farm products 
conform to the principle of cost of production in the 
tendency of prices, there will be a corresponding ten- 
dency to shift the tax upon the final consumer. 

Thus direct and indirect taxes are not always dis- 
tinguishable; but in the tax systems of the United 
States most state and municipal taxes are assumed to be 
direct, because levied upon persons and more permanent 
forms of property, while the taxes of the general gov- 
ernment are by the Constitution indirect, unless levied 
upon the states according to population. They are in the 
form of customs or excise, in which some article of 
commerce or some service rendered gives a value upon 



Assessment of Taxes 353 

which the tax may be transferred. Thus the state, the 
county, the city and the school district levy upon assess- 
ment of property and enumeration of polls. The United 
States collects upon imported goods of various kinds, 
upon special articles of manufacture, upon persons or 
corporations carrying on particular business, and upon 
commercial transactions of various kinds. 

Assessment of direct taxes. — Assessment implies an 
enumeration of property in the possession of supposed 
owners and an appraisement of its value. The officer 
making the assessment is under constraint of an official 
oath to give a fair valuation. The market price is sup- 
posed to control his judgment, and is usually explicitly 
named in law. 

In actual practice in various states of the Union as- 
sessed valuation often falls as low as one -third or even 
one -fifth of a fair estimate at market value. This is 
brought about by several causes. Each assessor fears 
over -valuation, lest his district will bear too large a 
share of more general expenses; and his successor is in- 
clined rather to lower than raise the standard of value, 
from neighborly interest. Even if the assessors of an 
entire county agree upon terms of valuation, they are 
together under the same influence with reference to state 
and special taxes. A more definite cause of under- 
valuation is the practice of exempting a certain limited 
amount of property from all taxes. If personal property 
worth $200 is exempt from taxation for every house- 
holder, the smaller the assessment for his total property, 
the larger in proportion is the exemption. Specific taxes 
at a fixed rate, for state or school or improvement pur- 

W 



354 Rural Wealth and Welfare 

poses, operate in the same way to force down the valua- 
tion of property in the entire state or district. In 
assessment of real estate even greater violence is some- 
times done to equity. In newly settled portions of the 
country the valuation of land held in the name of non- 
resident owners is notoriously high. Often in cities the 
assessor is subject to political influences and social con- 
nections in such a way as to destroy all equity in 
taxation. The official oath attached to such assessments 
is a sham. 

If all property of stated kinds were equally and 
fairly valued, the burden of taxation would be most 
fairly distributed as regards property owners. Any 
tendency to undervalue is sure to oppress the weaker 
part of these property holders. If the price of a horse 
is fixed at twenty dollars, when the average price is 
sixty, the more wealthy owner of horses whose average 
value is above the general average has a larger part of 
his property exempt than the poorer owner whose horses 
are below the average. In the same ratio all household 
goods and even farms and buildings are under-estimated. 

In this connection it is proper to mention the exemp- 
tion of certain property devoted wholly to public welfare 
and contributing alike to the good of all citizens. In 
every state there are multitudes of schools, created and 
sustained by gifts of benevolent men. These supple- 
ment and extend the work of the state for general en- 
lightenment, and are wisely encouraged by exemption 
from the burden of taxation, because their entire income 
is devoted to the same ends which the state serves. 
Public libraries and churches, devoted to such general 



Exemptions from Taxes 355 

enlightenment and moral growth, are wisely included in 
this exemption. Nobody suffers, but everybody gains, 
by the use of private property for such purposes. If in 
any way these institutions serve the private ends of 
individuals, those individuals become themselves prop- 
erty owners, subject to the same taxation as others. 
Such exemptions may extend even to art collections 
made by private funds, and to extensive grounds laid 
out in parks, provided they are open to the public and 
serve as a means of wholesome recreation and culture. 

In general, however, specific exemptions of private 
property from any taxes lead to abuse of privileges, 
jealousies and popular dissatisfaction, which result in 
danger to government and harm to the people. 
Exemptions of property used for particular purposes, 
like a farmer's team, may be thought of as a bounty 
upon such means of production. But the effect is almost 
always to the disadvantage of the weak, and the practice 
gives a general encouragement to the disposition to 
escape taxes. Farmers, of all classes of people, are 
most interested in a fair and painstaking assessment 
of all forms of property. Their influence is most 
widely extended and far-reaching in its effects. The 
whole community should be led to realize the absolute 
necessity of fair taxation and prompt meeting of indi- 
vidual responsibility. Fraud in the treatment of taxes 
is a crime against society, whether it involves false 
swearing or not. It partakes of the nature of treason, 
and may well be subjected to severe penalties. Usually, 
however, a penalty in the shape of additional taxes and 
forfeiture of property by sale for taxes, with room for 



356 Rural Wealth and Welfare 

redemption at considerable expense, are sufficient to 
secure a proper assessment and collection, if the com- 
munity are really in earnest in resisting the fraud. 

Indirect taxes. — The methods of indirect taxation 
by excise and custom duties have been familiar for ages. 
They are usually favored by politicians who dread the 
opposition of the people to taxation, because the collec- 
tion is so incidental to ordinary expenditures as scarcely 
to be realized and never clearly measured. Few users 
of tobacco or strong drink have any distinct idea what 
portion of the cost represents the government revenue. 
Still less in drinking the cup of coffee, or sweetening it 
with sugar, does the person benefited weigh the tax he 
pays. It is doubtful if most of those who read this, 
actually know that sugar pays a tax, while tea and 
coffee do not, in our country. 

So convenient is this mode of taxation that it forms 
the favorite mode of discrimination in favor of produc- 
tive industries. A tariff of 50 per cent upon imported 
cloth may actually increase the price of similar cloths 
manufactured at home by nearly that amount, thus 
fostering cloth -making by a premium on the product, 
while only a few discover the added burden of the 
tax. Yet these modes of taxation are usually costly to 
the people. Even if free from complications with either 
preventing vice or fostering industry, they require a 
separate body of officials from those provided for direct 
taxation. They involve investment by every wholesale 
and retail dealer of extra capital in taxes, upon which 
extra interest and profit is expected. The actual con- 
sumer bears this extra burden with only partial realiza- 



Customs and Excise 357 

tion of its bulk. If duties are high, the temptation to 
smuggling and fraud becomes great, and a force of offi- 
cials must be stretched around the borders of a country 
to prevent it. 

Custom, or duty. — Duties are said to be either specific 
or ad valorem. Specific duties are a definite sum upon 
every pound, ton, yard or other unit of measure, ap- 
plied to the article taxed. They are easily assessed, and 
misrepresentation or fraud is scarcely possible. Ad 
valorem duties are a certain rate per cent upon the in- 
voice value of the goods. In these, frauds are abun- 
dant, and experts are required to prevent them. Specific 
duties are relatively heavy upon the consumers of 
goods of cheaper quality. A tax of 25 cents on each 
yard o*f cloth worth a dollar is five times as heavy 
as the same tax on cloth worth five dollars. Equal- 
ization is frequently attempted by combination of 
specific duties upon all goods of a certain character 
with ad valorem duties upon all such goods above a cer- 
tain quality. 

Excise collections. — The same difficulty is experienced 
in adjusting taxes by excise under our internal revenue 
system. Such revenues are largely collected through a 
sale of stamps, though the dealer himself may be re- 
quired to pay a license fee, to secure the necessary in- 
spection. Here, too, the tax is specific and bears most 
heavily upon the users of the poorest grade of goods. 
If attempt is made to grade it by quality, expensive ma- 
chinery for preventing fraud is necessary. This is well 
illustrated in the list of officials required in connection 
with distilleries and bonded warehouses. Both the 



358 Rural Wealth and Welfare 

manufacture and the sale of alcoholic liquors must some- 
where be under the inspection of an expert officer. All 
this necessary expense of collecting must be borne by 
the consumers. The bonded warehouse itself must not 
be mistaken for a part of this machinery, though it is 
essential to the collection. It is simply a device by 
which the holder of manufactured liquors subject to sale 
can avoid the payment of a tax until the time of actual 
delivery. His warehouse, being under bonds to the gov- 
ernment, is open only in the presence of the revenue 
officer, who carries one of the keys necessary to its open- 
ing. Without this the tax would have to be paid at time 
of manufacture, and interest on that amount, to greater 
or less extent, would finally be paid by the consumer. 
While this system protects essentially against fraud on 
the part of the owner alone, it does not protect against 
the weakness or wickedness of officials, and the tempta- 
tion is sometimes enormous. 

Peculiar taxes. — Aside from these general forms of 
taxation, peculiar devices are common. The stamps re- 
quired on official papers or commercial transactions, in- 
volving checks, notes, mortgages and deeds, have been 
familiar at various times in our country, and are asso- 
ciated with the history of the world. These differ little 
from the practice of affixing stamps to patent medicines, 
cigars and other articles of trade; but instead of being 
attached to the article transferred they are affixed to the 
check or note or deed or bond employed in the transac- 
tion. These bear unequally, being proportionally heavy 
upon the people of small means, and are generally 
annoying in active business. They are frequently 



Peculiar Taxes 359 

favored, however, as being felt most by those who deal 
most in commerce. 

The heavy taxes laid upon the consumption of alco- 
holic liquors and tobacco illustrate another device for 
making so-called luxury bear the heavier portion of 
taxes. It looks both ways, attempting to check luxuri- 
ous living or vicious practices by a penalty for indul- 
gence, and at the same time to secure a revenue as the 
result of such indulgence. Evidently in so far as it 
prohibits indulgence it is not a revenue measure ; and in 
so far as it secures the revenue it does not prohibit in- 
dulgence. It is borne somewhat patiently, because each 
person feels that he can avoid the payment by ceasing to 
indulge himself. The universal tendency is to make it 
purely a revenue measure by fixing the tax just where it 
will not retard consumption in any material degree, and 
in some instances will give a quasi dignity to the dealer 
through his official license. 

Taxation of credits. — A very common device adopted 
in most of the states is that of assessing credits as well 
as property. The majority of farmers favor the assess- 
ment of mortgages upon a valuation equal to, if not 
higher than, that upon farms. They forget that the 
ability to pay taxes from year to year comes out of the 
profit or rent from the farm; and if both farm and 
mortgage are taxed, the adjustment comes through the 
interest which the mortgage must bear. To illustrate, a 
father sells his farm, worth $5,000, to his son, taking a 
mortgage for the entire value. If mortgages are as- 
sessed, the value of that. farm for all purposes of taxa- 
tion is $10,000; and yet the living of both father and 



360 Rural Wealth and Welfare 

son, taxes included, comes out of that farm's produc- 
tion. The two have no more property and no more 
ability after the transaction than before. Thus the 
mortgaged farms in every community where mortgages 
are taxed bear double burden. 

In a similar way the taxation of any form of notes 
or bonds or stock doubles the assessment in form with- 
out increasing the abilities. The actual property in use 
will finally bear the burden of both assessments . The 
road-bed and rolling stock of a railway are property 
whose value is readily estimated. The actual ownership 
is in a corporation which may be distinctly taxed. Cer- 
tificates of stock are individual titles in that corporation 
whose property has already been taxed. Its outstanding 
bonds are simply claims against that corporation, to be 
paid out of that property which has already been taxed. 
So every note, being evidence of debt simply, is not a 
representative of property, but simply a claim against 
property supposed to exist somewhere else. It may be 
an absolute fiction, in being a claim against property 
only hoped for. The result of all efforts to treat certifi- 
cates of indebtedness as personal property are hardship 
to debtors and apparent fraud on the part of many 
creditors. Even though the creditor escapes taxation by 
hiding his possession of a mortgage, the possibility of 
its being taxed is always counted in his bargain with the 
borrower as an important element in interest. The ex- 
perience of those states in which such taxation has been 
abolished proves that lower rates of interest are sure 
to follow. 

Income taxes. — A favorite device in some countries, 



Income Taxes 361 

and often advocated in this, is a direct tax npon in- 
comes above a certain amount, graduated so as to give 
a much larger rate upon large incomes than upon more 
moderate ones. The most obvious reason for such a 
distinction against the large incomes is the evident 
failure of our national system of taxation to distribute 
the burden according to ability. It is evident that the 
expenditures of the very wealthy for such articles as 
bring revenue to the government are not in the same 
proportion to their income as the expenditures of the 
poorer people are to their incomes. A further reason is 
based upon the supposition that large incomes involve a 
considerable unearned increment, in the shape of rent 
or extraordinary profits, because of accidental oppor- 
tunity or the crowding of population. An income tax, 
carefully graduated, is supposed to cause such extra 
privileges and opportunities to bear a fair share of gov- 
ernment expenses. 

There are several difficulties in administering such 
a tax which have stood in the wa}^ of its general and 
permanent adoption. No one has yet devised a certain 
or fair method of estimating income. The peculiarities 
of any business or employment make great variation in 
the ability given by a certain income in dollars and 
cents. The business man in a small town, with an in- 
come of $5,000, might live in relative luxury, and still 
have a surplus for investment in his business. The 
same man, attempting business in a large city, might, 
even with an income of $10,000, find it barely possible 
to keep up appearances. The income of farmers is 
largely in provisions and personal privileges from use of 



362 Rural Wealth and Welfare 

teams, etc., never counted in dollars and cents, while 
the village mechanic pays from his measured income for 
all such comforts, or goes without them. The actual, 
necessary expenses of the business of a professional 
man in the way of books and travel are as essential to 
his business as are farm implements and live stock to 
the farm; yet no one counts such expenses as a sub- 
traction from the income. A teacher promoted to a 
higher position is at once subjected to extraordinary 
expenses, and may be less able with a higher salary to 
meet the requirements of his new life than he was with 
a lower salary to meet the less expensive requirements. 

Another principal difficulty is the unpopularity of 
such a tax from its necessary interference with private 
business. The country will be almost certainly more 
divided along lines of wealth over an income tax than 
over anything else. On the part of the wealthy it 
seems an effort of the people to take from them actual 
property rights. On the part of the poorer classes it 
fosters the assumption that the more wealthy are un- 
justly so. In the nature of the case, it is an arbitrary 
adjustment without the possibility of establishing exact 
reasons for any distinctions made. Finally, since such 
distinctions are liable to be varied from time to time, an 
income tax requires some nice adjustment as to the 
nature of the income. An income from the sale of 
property is entirely different in character from the in- 
come made by interest on the same property. One is a 
part of permanent investment, the other is the result of 
productive investment. One destroys the principal if 
consumed, the other adds to the principal. Yet no one 



Inheritance Taxes 363 

could arrive at the actual, natural income, without a 
most intricate system of book-keeping open to public 
inspection. For without public inspection the tempta- 
tion to fraudulent returns, under the feeling that the 
tax is unjust, is so strong as to be demoralizing. 

Inheritance taxes. — A device much employed for 
making large accumulations of wealth bear a larger 
portion of the community's burdens is a heavy tax upon 
inheritance. Since such inheritance requires the guar- 
dianship of law for security of transfer, government is 
suffered to take a liberal fee for such transfer. More- 
over, the inheritor is assumed to have no such property 
interest in' what has been accumulated by another as to 
claim that he can be wronged if government takes a 
portion. It is defended also by socialists on the ground 
that large estates are dangerous to the general welfare. 

Some facts bear upon the opposite side, and are 
worthy of consideration. A large estate is the accumu- 
lation of enterprise and industry on the part of a man 
of more than ordinary abilities. The presumption is in 
favor of following his judgment in making that useful 
after his death. Most frequently it is employed in some 
huge industrial machine, which the public cannot man- 
age, but can destroy by even taking a portion from it. 
One of the main stimulants to all accumulation is the 
provision for the future wants of a family. If the state 
takes the accumulation, it also takes the responsibility 
for the successors in the family line. Wherever it is 
applied, it is felt to be a heavy burden upon the com- 
munity at large. If the state interferes with the free- 
dom of a testator, the chances are that few estates will 



364 Rural Wealth mid Welfare 

be accumulated, and wasteful methods of expenditure, 
diminishing the power of the entire community, will 
surely follow. Moreover, evasions of the inheritance 
tax are comparatively easj r , and are likely to be adopted 
extensively by the holders of large estates. The very 
rich can give away a large port-ion of their property be- 
fore death without material suffering. Only the mod- 
erately wealthy are obliged to hold on to their posses- 
sions until death. Any wealthy man can dispose of his 
wealth during his lifetime, and still retain its income, 
by giving it away, subject to an annuity. To prevent 
this the law would have to be extended with intricate 
inspection to cover all transfers of property. Let no 
one be deceived into feeling that this is a simple and 
easy way of saddling government expenses upon the 
rich. 

Special taxes. — A multitude of minor devices are 
worthy of brief consideration. An occupation tax on 
business men is easily levied, but bears unequally upon 
the original payers, and in the end falls most heavily 
upon the poorest. A house tax, measured by the num- 
ber of rooms, or the number of windows, or the number 
of fireplaces, has been supposed adjustable to actual in- 
come of the possessors. But it bears very heavily upon 
men in certain professions requiring house-room, and 
forces the poor into narrow and crowded quarters. The 
rent of the poor is necessarily a larger proportion of 
their living expenses than that of the well-to-do. It is 
a serious hardship when a tax is levied upon that which 
a man cannot possibly save. 

A tax upon retail dealers and peddlers is frequently 



Special Taxes 365 

advocated, as tending to prevent the increase of unnec- 
essary middlemen and wasteful competition. Yet this, 
too, bears heavily upon the poor, since it crowds out 
also those who are satisfied with small profits and deal 
in small sales. Even a tax upon pawnbrokers, whose 
profits are supposed to be extraordinary, gives occasion 
for a sharper grinding of the poor. A study of all these 
devices will lead one to the conclusion that a tax upon 
property only, based upon a fair valuation and paid by 
the controller of the property, is fairest to the whole 
community and leads to truest conceptions of the rela- 
tion of property to public expenditure. It is certainly 
best for rural welfare. 

A single land tax.- — A brief consideration must be 
given to a proposed system of taxation, commonly 
known as the single land tax. The proposition is to 
tax all lands, including building sites, to such an extent 
as may be necessary to meet all public expenditures. 
The lands are to be valued for this purpose at the rent 
they will bring, independent of all improvements. The 
supposition is that such an income is due entirely to the 
effect of crowding population, and therefore belongs to 
society as a whole rather than to the individual pos- 
sessing it. In fact, if the state were to consume the 
entire economic rent, it would take only, it is said, 
what already belongs to the community. Other sup- 
posed advantages of the single tax system are the re- 
duced expense of assessment and collection, together 
with incidental effects in promoting production by 
removing burdens from capital, in preventing the hold- 
ing of land unproductive, possibly in equalizing wealth 



366 Rural Wealth and Welfare 

and diminishing greed for landed property, while the 
poorer, cheaper agricultural lands, having no rent 
value, would be relieved of all burden. These are 
essentially the views maintained by the followers of 
Henry George, the leading champion of such taxation. 
It is claimed, further, that the poor in crowded cities 
would be better housed, since buildings would bear no 
taxation, and holders of city lots would make them pro- 
ductive through construction of buildings without 
adding to their burden of taxation. It is claimed also 
that such taxation would be finally distributed, and 
fairly distributed, among all the consumers of products 
affected by land possession, as well as all even indi- 
rectly making use of the land. Since food and shelter 
are universal, all would contribute, so far as they are 
self-dependent, according to food consumed and space 
occupied. 

These statements are somewhat inconsistent with 
each other. If rent is of such a nature, as assumed at 
the beginning of the argument, that it cannot directly 
affect all values because it depends upon those values 
for its existence, a tax levied upon it cannot be distrib- 
uted but rests wholly upon the landholder. If, on the 
other hand, a tax on land is distributed among all con- 
sumers of its products, there is no economic rent, but 
the burden rests upon the consumers alone, according to 
the amount consumed, subjecting this tax to the objec- 
tion against all indirect taxes, that the poor bear the 
heavier burden. 

It is evident, too, that such a tax must bear heavily 
upon the unthrifty. The valuation of farms must be 



Single Land Tax 367 

made by an expert judge of what farms similarly situ- 
ated ought to produce. A farm valued at $500 annual 
rent might, under thrifty management, produce twice 
as much as under unthrifty management. The tax, 
under thrifty management, could be easily paid; under 
unthrifty management, it would ruin the manager. This 
certainly does not levy the tax according to ability. It 
also bears heavily upon the enterprising young farmer 
whose capital is small, as compared with the long-estab- 
lished farmer with accumulated capital. The man weak 
in capital would bear as heavy a burden as the strong. 

Again, it provides no system of taxation in newly 
settled communities where land has practically no value 
except from improvements. Unless a fictitious value 
be given to such land for purposes of taxation , as some- 
times happens with reference to non-resident land- 
holders, no government could be maintained. 

Finally, since under this system government assumes 
a control over landed estates, from which it exempts all 
other forms of property, it tends toward the nationali- 
zation of land, which would necessarily destroy the 
system itself. For if government claims all increment 
from land production, land ceases to be property and 
does not pass from owner to owner at a market value: 
then government fixes arbitrarily the rental of space, 
and taxation is distributed upon a new principle. If a 
new principle were not to be assumed, there could 
hardly be a device conceived more likely to make the 
rich richer and the poor poorer. Farmers, of all men, 
are best situated to realize the unequal workings of a 
single land tax system, 



368 Rural Wealth and Welfare 

Government debts. — An important part of govern- 
ment machinery is connected with its ability to make 
use of borrowed capital. Under the pressure of heavy 
expenditures in case of war, or in undertaking perma- 
nent improvements in a new country, or in carrying on 
various enterprises for common welfare, the demand for 
means is greater than the supply from ordinary modes 
of taxation. Not even the special devices of war taxes 
can meet at once the burdens of a defensive war. The 
rightfulness of such expenditures upon the credit of the 
government depends upon the object to be secured. The 
expense of the war which defends and preserves the 
future home of posterity may properly be borne in part, 
at least, by posterity. The court house, the water 
works, or the electric plant, whose benefits will be shared 
by the people for a hundred years, may properly be so 
constructed that all the people benefited may share in 
the burden. Good economy requires the foresight which 
builds beyond mere present need. The danger is that 
expenditure made under expectation that others will pay 
may be wasteful, and often other reasons than actual 
needs in the interest of private speculation control. 

Nevertheless, there is good reason for government 
debts; and every form of government, from the loftiest 
to the most insignificant, finds such indebtedness easy to 
contract. The smallest school district can issue scrip in 
payment of its teacher, or can issue bonds for the con- 
struction of its school -house. Only the general govern- 
ment, under our laws, can borrow by issuing due -bills 
in the form of legal tender notes. All of these certificates 
of indebtedness enter into the general commerce under 



Government Debts 369 

the common law of supply and demand, and bear an 
economic price proportional to the certainty of their 
final payment and the convenience of their use in com- 
mercial transactions. The exemption of national 
bonds, or even state bonds, from local taxation works no 
more hardship than the exemption of state property. 
Under ordinary circumstances the entire advantage of 
such exemption is gained by the state, and so by all the 
taxpayers of the state. The exemption of national 
bonds from every form of taxation prohibits interference 
with the government's privilege of borrowing when and 
where it can, and the advantage comes back to the 
people in full through the low rate of interest or the 
premium in price which such bonds bear. They are 
subject to fluctuations in value through their being a 
means of transferring floating capital between industries. 
Under a stable government, with a somewhat permanent 
debt, a holder of bonds is a sort of stockholder in 
the governmental wealth, with definite stated dividends 
rather than profits. 

Such bonds have various effects upon a general in- 
dustry of the country. While they lessen somewhat the 
immediate burdens of present productive industries, 
they may increase the burden of the same industries in 
a second generation. Their convenience in securing an- 
nuities for long series of years may diminish the enter- 
prise of a community by fostering a class of non- 
producers, whose wealth is represented in the display of 
government buildings rather than in productive enter- 
prises. Just so far as government employs the capital 
of the country through bonds, it diminishes the capital 



Rural Wealth and MS'f.li 

which would otherwise find investment in productive 
employment. The langei : f extravagance to even small 
communities, from the ease with which such government 
debts can be contracted, warrants the contrivance : 

strong constitutional limitations. Indeed, provision, not 
only against extravagant debt, but for reasonably prompt 
settlement, may well be required by constitutional law. 
All property holders, but especially land holders, are 
interested in preventing extravagant outlay by means of 
bonded indebtedness. Farmers must know that the 
burden will have to be borne, with all the natural addi- 
tions, by the property they hold, and the value of that 
property will be lessened by whatever extra burden 
it bean 

'^-Mement of government debts. — The settlement of 
government debts is a matter of uncertain provision 
In many instances there has been a tendency toward a 
permanent debt. The United States has shown a sur- 
prising capacity for making such debts for all sorts of 
purposes, but has also shown an equally surprising 
ability in payment. And yet examples are not wanting, 
even in our own country, of a tendency to in definite 
; -Tponement and a rapidly increasing burden, until | 
settlement could be made only by compromise or a total 
repudiation. The effect of such bankruptcy of nation, 
state or municipality is like that of any failing enter- 
prise, only more widely felt. The repudiation of a 
government debt affects the capital of the country like 
the confiscation of estates under ancient tyranny. It 
the ommon faith, which is the basis for true 
productive industry. It takes the nation back into the 






Government Debts 371 

dark ages as regards its relation to the individual wel- 
fare of citizens. Every economic reason existing for the 
collection of private debts, and leading to government 
machinery for collecting such debts, has still greater 
force when applied to the debts of governments. The 
demoralization, widespread and destructive, which fol- 
lows repudiation, or anything resembling it, cannot be 
outgrown for generations. The most plausible reasons 
for repudiation, except in cases of absolute fraud against 
the government, should have no weight with a citizen 
who cares for the welfare of his fellow -citizens and their 
progress toward that welfare, under the natural laws 
concerning wealth. A nation of robbers is safer to live 
in than a robbing nation. 



CONCLUSION 

It is clear that Rural Welfare, as far at least as it 
rests upon Wealth, is to be gained by careful study of 
laws of nature and human nature quite independent of 
mere wishes. The only way to improve the present 
situation of affairs in any community is to use the nat- 
ural forces within reach to advantage. All the growth 
of the past is preparation for more growth and better 
fruit in the present and future. The farmer who 
knows most about the fundamental principles of prop- 
erty and property rights in society is most likely to 
best serve his community, as well as himself. 

Still it is equally clear that the chief elements of 
Rural Welfare are not mere wealth. Wealth is but 
the material out of which the external machinery of 
welfare is formed. Every way essential to progress in 
any degree, it does not give the chief test of progress. 
No one is gaining the full use of his wealth until it is 
well spent for the welfare that is strictly personal, — 
health, wisdom and virtue. No society, however 
wealthy, has reached true welfare till all its members 
appreciate the higher welfare, and make wealth -seeking 
a means for securing it. 

Rural communities can take advantage of many 
inexpensive ways of adding to their welfare without 
great wealth The natural surroundings of the country 

(373) 



374 Rural Wealth and Welfare 

home give development to abilitj^ and courage in chil- 
dren that, are better than wealth. The same principles 
of thrift that are to be cultivated for the sake of 
material comforts apply to the larger welfare that a 
wise enjoyment of nature's gifts and nature's lessons 
may bring. The thrifty farmer comes nearest of all 
men to the ideal condition of the wise man, expressed 
in the wish, "Give me neither poverty nor riches." He 
can have enough to comfortably house, clothe and feed 
his family in the midst of surroundings as wholesome 
as the world affords. He can give his children, by the 
aid of their healthy bodies and strong hearts, as good 
opportunities for education as any can use. He has a 
natural leisure for self -culture in the use of papers and 
books, if he tries to use it, and his relations with neigh- 
bors of similar abilities are more human, more true, 
than those found in any other circumstances. If farm- 
ers live as they ought, their homes are centers of true 
hospitality, true sympathy for human rights ; and with 
a little more constant care for neighborly spirit would 
come nearest to giving the true foundation for manly 
and womanly character in children, and so in their 
parents. 

A family of eight children grew up on a farm of 
little more than one hundred acres, chopped out of the 
wilderness. Father and mother worked hard and strove 
thriftily to make their children useful. A school was 
the first requisite, even though it must be taught in 
the one room that was kitchen, library and parlor, if 
not the bedroom, too. The church was equally impor- 
tant, though it took the choicest lot on the farm for 



Conclusion 375 

its location. Newspapers and wholesome books were as 
needful as daily bread. The household was a center 
of cheer and interest for the entire community. The 
first Sunday School and the first Temperance Society 
of all that new country were organized there. The 
trend of national life towards higher ideals of justice 
for all humanity was first recognized there, so that 
three of the four votes cast in that township for the 
first liberty ticket were connected with the same house- 
hold. The whole world came nearer these youth be- 
cause they learned about it. 

When opportunity came for larger growth in col- 
lege training, all but the oldest boy and the oldest girl 
sought it eagerly. These made the old homestead and 
a neighboring farm worthy centers of the same true 
influence. The three sons and the three daughters 
whose education lifted them to a little wider field of in- 
fluence are all recognized as having been leaders in this 
country, and their names are cherished by thousands 
who have known their work. The thrift that has made 
them useful in the truest welfare of the world was cul- 
tivated and trained on that little farm. 

The little farm became itself an evidence of thrift, 
attractive in its beauty as well as in its productiveness. 
It gave to the father and mother a satisfactory living 
till both died, the mother at eighty, and the father at 
nearly a hundred. Riches they never needed, for they 
had enough with the blessings of children and child- 
ren's children scattered through the world. The farm 
is still in the family, doing its good work for the 
fourth and fifth generations, in the same wholesome 



376 Rural Wealth and Welfare 

way and with promise of never-ending welfare. A 
little wealth well used means enormous welfare. 

The farm homes of America will be the seat of 
America's welfare if their occupants know all they can 
of the thrift that gives power, and do as well as they 
know. Farmers who think carefully and earnestly will 
not expect to overturn nature as it is, but to use it for 
all it is worth. This little book is intended to help 
toward such a use of power and wealth as may bring 
genuine welfare. Its author hopes in this way to pay 
in part the debt he owes to the little farm. 



INDEX 



Abandoned farms, 303. 

Aggregation, disadvantages of, 197 ; 
limit to, 196; of forces, 57; of in- 
dustry, 191. 

Aims of industry, 21. 

"Anarchy," 329. 

Annual fluctuations in prices, 92, 99, 
101, 105. 

Arbitration in labor conflicts, 268. 

Assessment, direct taxes, 353. 

Association, complex, 55; compound, 
56; methods of, 55; simple, 55. 

"Autonomy," 328. 

Balance of trade, 152. 

Bank business, 148; inspection, 151; 

liabilities, 155; loans, 153; resources, 

155. 
Banking, safety of, 155. 
Banks and banking, 140; described, 

141; government, 147; national, 144; 

state, 136. 
Bankruptcy, 179. 
Beef prices, 102-106. 
Bimetalism, 126, 128. 
Bonanza farms, 201. 
Bonds, exemption from taxation, 369; 

deferred payment, 160. 
Borrowed money, 164, 284. 
Borrowers and lenders, 154. 
Bounties, 207. 
Boycott, the, 262. 
Business security, 224. 

Capital a timesaver, 40; circulating or 
fixed, 40; conservative, 44; defined 



and classified, 38 ; distinguished from 
wealth, 38; floating, 43; in farming, 
43; of a country, 39; proceeds of, 279; 
prudent adjustment of, 314; "timid," 
44; unproductive, 42. 

Cattle, numbers of, 9, 83. 

Character in production, 47. 

Charts, list of, xiii. 

Cheap living, 237. 

Cheap money drives out good, 125. 

Churches, taxes on, 354. 

Civilization, developing, 53. 

Clearing house, 149. 

Clearing systems, 150. 

Coinage, 118; of the United States, 119. 

Coin a country's capital, 133; as cur- 
rency, 131. 
"Collectivism ,"331. 

Combinations for farming, 204; for 
production, advantages, 193. 

Commerce overestimated, 61. 

"Communism," 330. 

Compensation, actual and nominal, 
236. 

Complex association, 55. 

Compound association, 56. 

Conclusion, 373. 

Conflict between wage-earners and pro- 
fit-makers, 257. 

Conservative influence as security for 
business, 224. 

Consumption, cooperative, 335; for 
growth, 317; luxurious, 319; of 
wealth, 307; wasteful, 322. 

Contents, table of, xi. 

Control of natural forces, 28. 



(377) 



378 



Index 



Cooperative consumption, 335; indus- 
try, 272; stores, etc., 335. 

Copyright, 210. 

Corn, acreage and yield, 85; prices of, 
New York, 87-91; consumption of, 85. 

Cost and value, 69. 

Courts of arbitration, 268. 

Cows, numbers of, 9, 83. 

Credit by accounts, 133; by due bills, 
134; currency, 135, 137; expanding, 
167; expansion, 158. 

Credits, taxation of ,[359. 

Crops in United States since 1850, 10; 
yield of, 83-86. 

Crop-year, 78. 

Currency, 130; advantages of national 
bank, 146; credit, 135. 

Custom, or duty, 357. 

Deferred settlement and credit expan- 
sion, 158; in exchange, 138. 

Department stores, 203. 

Destructive consumption, 324. 

Developing civilization, 53. 

Diminishing returns, law of, 79. 

Discipline in production, 47. 

Distribution of wealth, 233. 

Division of labor, advantages, 182; 
disadvantages, 188; economy of, 180; 
limits, 184; on farms, 186. 

Duty, or custom, 357. 

Economic functions of government, 

337 ' [346. 

Economic machinery of government, 

Economic science, 2. 

Efficiency, requisites, 52. 

Enlightened vs. savage, 50. 

"Equality of opportunity," 333. 

Equity in wages, 277. 

Exchange, advantages, 58; in distribu- 
tion, 234; in production, 58; limits 
of, 60; its machinery, 109. 

Excise collections, 357. 

Exemptions from taxes, 354. 

Exertion as related to value, 69. 

Expanding credit, 167. 



Farm crops in United States since 1850, 
10; interests, fluctuation of, 9; prod- 
ticts, prices of, 78; stock in United 
States, 9, 83. 

Farming combinations, 204. 

Farms in the United States, 9, 304; 
small, for homes, 202. 

Federations of labor, 267. 

Final utility, 67. 

Financial crisis, 169. 

Floating capital, 43. 

Fluctuation of prices, 87-108. 

Forces in production, 27. 

Franchises, 211. 

Free communication, 109. 

Freedom in markets, 75. 

General welfare, 1. 

Gold, ratio to silver, 124; standard, 128. 

Government and universal needs, 339. 

Government chief incentive to produc- 
tion, 206. 

Government, ends of, 338; stable, 18. 

Government banks, 147; churches, 342; 
debts, 368, 370. 

Government lands, 294. 

Government machinery, 346. 

Government resources, 346. 

Government wards, 342. 

Governmental limits, 337. 

Grains, consumption of, 85. 

Gresham's law, 125. 

Hard times, 172; causes of, 173; cure 

for, 178; remedies, 176. 
Higgling of the market, 73. 
Hogs, number in United States, 9, 83; 

prices of, 96-99. 
Horses, number in U. S., 9, 83. 
Human energy, 27. 

Ideal manliness, 49. 
Illustrative charts, list of, xiii. 
Improved farming, effect of, 81. 
Imprudent consumption, 319. 
Incentive of good government, 206. 
Income taxes, 360. 



Index 



379 



Indirect taxes, 356. 

Individual Efficiency, 49. 

Individual responsibility for use of 

wealth, 310. 
Individualism, 328. 
Inheritance taxes, 363. 
Insurance, applications of, 229, 239; 

governmental control of, 228; methods 

of, 226; nature of , 225. 
Interest and rent distinguished, 279; 

principles of, 283; reasons for, 283; 

uses of, 291; varying rates of, 286. 
Invention in farming, 36. 

Labor and savings, relative importance, 
chart, 52. 

Labor conflicts, arbitration in, 268. 

Labor defined and classified, 32; opera- 
tive, executive, speculative, 35; phys- 
ical, mental, moral, 34. 

Labor restrictions, 274. 

Land as a force, 29. 

Land rent, 293. 

Land values, decrease of, 302; sources 
of, 297; variation, 300. 

Legal tender, 166. 

License, 210, 347. 

Live stock in United States, 9, 83. 

Loan associations, 290. 

Lockout, the, 263. 

Luxury, legal restrictions \ipon, 321; 
not easily defined, 319. 

Luxurious consumption, 319. 

Manliness, ideal, 49. 

Market, the higgling of, 73. 

Market price, 77. 

Markets, 72; freedom in, 75. 

Measures, weights and, 114. 

Methods of association, 55. 

Monometalism, 126. 

Monopoly privileges, 209. 

Mortgage note, 159. 

Mules, number of in United States, 

9,83. 

Multiple standard, the, 129. 

[146. 
National bank currency, advantages of, 



National banks, 144. 
National standards of value, 128. 
"Nationalism," 332. 
Nationalization of industry, 275. 
Natural forces, 28. 
"Nihilism," 329. 
Normal value, 70. 

Oats, acreage and yield, 9, 85; prices of 
New York, 87-91; consumption of, 85. 

Obstacles to fair adjustment of wages, 
259. 

Over-production, 172. 

Ownership, 15. 

Panic, financial, 179. 

Patents, 210. 

Personal attainments, 45. 

Population, drifting to cities, 303. 

Population in United States, 9, 83 

Pork, prices of, 96-99. 

Power not wealth, 6. 

Preface, vii-ix. 

Premiums, 206. 

Price of products and rent, 299. 

Price, the market, 77. 

Prices of beef, 102-105; corn, oats, 
wheat, 89; of farm products, annual 
fluctuations, 93, 99, 100, 101, 104; of 
farm products, fluctuations, 78; of 
hogs and pork, 95-101; of iron, kero- 
sene, silver, and farm wages, 106; of 
wheat, England, 94; of wheat, New 
York, 89-93. 

Principles of taxation, 348. 

Proceeds of capital, 279. 

Production defined, 21; extended, 25; 
forces in, 27. 

Productive industries, 21; labor, 32. 

Promissory note, 158. 

Profit sharing, 269. 

Profits defined, 236, 241; fluctuation in, 
255; in agriculture, 254; in competi- 
tion, 252; offset by losses, 256; ten- 
dency of, 253; variation in, 251. 

Progress in welfare, 17. 

Provision for future wants, 316. 



380 



Index 



Property, public, 16. 
Property rights, 15. 
Protection of the weak, 343. 
Protective tariff, reasons for, 213; 

reasons against, 217. 
Prudent consumption, 312. 
Prudent use of wealth, 312. 
Public property, 16. 
Public responsibility, 344. 

Quality, standard of, 116. 

Railroads in United States, miles of, 83. 

Ready transportation, 111. 

Rent, interest and, 279; propriety of, 

295; in price of products, 299. 
Rents, variation, 300. 
Rent values of land, 293. 
Repudiation of government debts, 370. 
Restrictive legislation, wages, 274. 
Restrictions on luxury, 321. 
Rural wealth analyzed, 12. 

Savage vs. enlightened, 50. 

Sheep, number in TJ. S., 9, 83. 

Silver, ratio to gold, 124. 

Single land tax, 365. 

Skill, 46. 

Sliding scale of wages, 271. 

Small farms for homes, 202. 

Socialism, 330. 

Socialistic tendencies, 333. 

Social organization for consumption, 

328. 
Sources of land values, 297. 
Special incentives to production, 206. 
Special taxes, 364. 
Standard, the multiple, 129. 
Standards of value, 117; in United 

States, 120; fluctuation of, 121. 
Standing account, 158. 
State banks, 136. 
Statistics, use of, 160. 
Stock of farms since 1850, in U. S., 9. 
Stock company, 161. 
Stock exchange, 162. 
Strikes, 259. 
Supply and demand, 72. 



Tariffs, 213, 357. 

Tariff, incidental tendencies, 220; 
reasons against, 217; reasons for, 215. 

Tax, a single land, 365. 

Taxation, direct and indirect, 351; ex- 
emption of bonds, 369; of credits, 359; 
principles of, 348. 

Taxes, assessment of, 353; on incomes, 
360; on inheritance, 363; on liquors, 
etc., 359; peculiar forms of, 358; 
special, 364. 

Trades unions, 264. 

Transformation in production, 24. 

Transmutation in production, 24. 

Transportation, cost of, 113; in pro- 
duction, 22; ready means of, 111. 

Trusts, 204; may cheapen products, 
194. 

Universal education, 341. 

Universal needs met by government, 

339. 
Usury laws, 288. 
Utility as related to value, 66. 

Value and cost, 69. 

Value, essentials of, 65; from utility, 
66; in services, 65; nature of, 63; 
normal, 70; of gold and silver, fluc- 
tuations of, 122; standards of, 117; 
the basis of exchange, 63. 

Vicious consumption, 323. 

Wage-earners in conflict with profit- 
makers, 257. 

Wages and profits, 239. 

Wages, defined, 241; fluctuation of, 
248; obstacles to fair, 259 ; of women, 
247; real and nominal, 236; relation 
to wheat price, 94 ; sliding scale, 271; 
tend upward, 248; under stimulated 
competition, 245; under supply and 
demand, 244; variation of, 243; with 
cheap transportation, 250. 

Wants basis of wealth, 14; certain, 14; 
individual, 16. 

Waste, false notions of, 325. 



Index 



381 



Waste in rivalry, 326. 

Wasteful consumption, 323. 

Watering stock, 162. 

Wealth, consumption of, 307; denned, 
5, 51; distinguished from power, 6; 
distribution, 255; individual use of, 
309; in farming, 3; in welfare, 1; for 
welfare, 307; material, 12; (rural) 
analyzed, 12 ; used by individuals, 
307. 



Weights and measures, 114; system of, 

decimal, 115. 
Welfare, elements of, 1; mutual, 2; 

progress in, 17, 373. 
Wheat, acreage and yield, 85; crop in 

United States, 85, 89, 91; world's 

crop, 89, 91. 
Wheat prices, annual New York, 92; 

in England, 94; in New York, 87-93. 
Women's wages, 247. 



The Best and Newest 
Rural Books 



BOOKS ON LEADING TOPICS 
CONNECTED WITH AGRI- 
CULTURAL AND RURAL 
LIFE ARE HERE MENTIONED. 
EACH BOOK IS THE WORK 
OF A SPECIALIST, UNDER THE 
EDITORIAL SUPERVISION OF 
PROFESSOR L, H. BAILEY, OF 
THE CORNELL UNIVERSITY, 
OR BY PROFESSOR BAILEY 
HIMSELF, AND IS READABLE, 
CLEAR-CUT AND PRACTICAL. 



THE RURAL SCIENCE SERIES 

Includes books which state the underlying principles 
of agriculture in plain language. They are suitable 
for consultation alike by the amateur or professional 
tiller of the soil, the scientist or the student, and are 
freely illustrated and finely made. 

The following volumes are now ready: 

THE SOIL. By F. H. King, of the University of Wisconsin. 303 pp. 45 
illustrations. 75 cents. 

THE FERTILITY OF THE LAND. By I. P. Roberts, of Cornell Univer- 
sity. Second edition. 421 pp. 45 illustrations. $1.25. 

THE SPRAYING OF PLANTS. By E. G. Lodeman, late of Cornell Uni- 
versity. 399 pp. 92 illustrations. $1.00. 

MILK AND ITS PRODUCTS. By H. H. Wing, of Cornell University. 
280 pp. 33 illustrations. $1.00. 

THE PRINCIPLES OF FRUIT-GROWING. By L. H. Bailey. Second 
edition. 514 pp. 120 illustrations. $1.25. 

BUSH-FRUITS. By F. W. Card, of Rhode Island College of Agriculture 
and Mechanic Arts. 537 pp. 113 illustrations. $1.50. 

FERTILIZERS. By E. B. Voorhees, of New Jersey Experiment Station. 
Second edition. 335 pp. $1.00. 

THE PRINCIPLES OF AGRICULTURE. By L. H. Bailey. Second edi- 
tion. 300 pp. 92 illustrations. $1.25. 

IRRIGATION AND DRAINAGE. By F. H. King, University of Wisconsin. 
502 pp. 163 illustrations. $1.50. 

THE FARMSTEAD. By I. P. Roberts. 350 pp. 138 illustrations. $1.25. 

RURAL WEALTH AND WELFARE. By George T. Fairchild, Ex-Presi- 
dent of the Agricultural College of Kansas. 381 pp. 14 charts. $1.25. 

New volumes will be added from time to time to 
the Rural Science Series. The following are in 
preparation : 

PRINCIPLES OF VEGETABLE GARDENING. By L. H. Bailey. In press. 
PHYSIOLOGY OF PLANTS. By J. C. Arthur, Purdue University. 
PRINCIPLES OF BREEDING OF ANIMALS. By W. H. Brewer, of 
Yale University. 

PLANT PATHOLOGY. By B. T. Galloway and associates of U. S. Depart- 
ment of Agriculture. 

FEEDING OF ANIMALS. By W. H. Jordan, of New York State Experi- 
ment Station. 

FARM POULTRY. By George C. Watson, of Pennsylvania State College. 



THE GARDEN-CRAFT SERIES 

Comprises practical hand-books for the horticultur- 
ist, explaining and illustrating in detail the various 
important methods which experience has demon- 
strated to be the most satisfactory. They may be 
called manuals of practice, and though all are pre- 
pared by Professor Bailey, of Cornell University, 
they include the opinions and methods of success- 
ful specialists in many lines, thus combining the 
results of the observations and experiences of nu- 
merous students in this and other lands. They are 
written in the clear, strong, concise English and in 
the entertaining style which characterize the author. 
The volumes are compact, uniform in style, clearly 
printed, and illustrated as the subject demands. 
They are of convenient shape for the pocket, and 
are substantially bound in flexible green cloth. 

THE HORTICULTURIST'S RULE-BOOK. By L. H. Bailey. Fourth 
edition. 312 pp. 75 cts. 

THE NURSERY-BOOK. By L. H. Bailey. Third edition. 365 pp. 152 
illustrations. $1.00. 

PLANT-BREEDING. By L. H. Bailey. 293 pp. 20 illustrations. $1.00. 

THE FORCING-BOOK. By L. H. Bailey. 266 pp. 88 illustrations. $1.00. 

GARDEN-MAKING. By L. H.IBailey. Third edition. 417 pp. 256 illus- 
trations. $1.00. 

THE PRUNING-BOOK. By L. H. Bailey. Second edition. 545 pp. 331 
illustrations. $1.50. 

AMATEUR'S PRACTICAL GARDEN-BOOK. By C. E. Hunn and L. H. 
Bailey. 250 pp. Many marginal cuts. $1.00. 



T 



WORKS BY PROFESSOR BAILEY 

HE EVOLUTION OF OUR NA- 
TIVE FRUITS. By L. H. BAILEY, Pro- 
fessor of Horticulture in the Cornell University. 

472 PACES— 125 ILLUSTRATIONS — $2.00 

In this entertaining volume, the origin and de- 
velopment of the fruits peculiar to North America 
are inquired into, and the personality of those horti- 
cultural pioneers whose almost forgotten labors 
have given us our most valuable fruits is touched 
upon. There has been careful research into the 
history of the various fruits, including inspection 
of the records of the great European botanists who 
have given attention to American economic botany. 
The conclusions reached, the information presented, 
and the suggestions as to future developments, can- 
not but be valuable to any thoughtful fruit-grower, 
while the terse style of the author is at its best in 
his treatment of the subject. 

The Evolution of our Native Fruits discusses The Rise of 
the American Grape (North America a Natural Vineland, Attempts 
to Cultivate the European Grape, The Experiments of the Dufours, 
The Branch of Promise, John Adlum and the Catawba, Rise of 
Commercial Viticulture, Why Did the Early Vine Experiments Fail ? 
Synopsis of the American Grapes) ; The Strange History of the Mul- 
berries (The Early Silk Industry, The "Multicaulis Craze,"); Evolu- 
tion of American Plums and Cherries (Native Plums in General, 
The Chickasaw, Hortulana, Marianna and Beach Plum Groups, 
Pacific Coast Plum, Various Other Types of Plums, Native Cherries, 
Dwarf Cherry Group ) ; Native Apples (Indigenous Species, Amelio- 
ration has begun); Origin of American Raspberry-growing (Early 
American History, Present Types, Outlying Types) ; Evolution of 
Blackberry and Dewberry Culture (The High-bush Blackberry and 
Its Kin, The Dewberries, Botanical Names); Various Types of 
Berry-like Fruits (The Gooseberry, Native Currants, Juneberry, 
Buffalo Berry, Elderberry, High-bush Cranberry, Cranberry, Straw- 
berry); Various Types of Tree Fruits (Persimmon, Custard-Apple 
Tribe, Thorn-Apples, Nut-Fruits) ; General Remarks on the Improve- 
ment of our Native Fruits (What Has Been Done, What Probably 
Should Be Done). 



WORKS BY PROFESSOR BAILEY 

THE SURVIVAL OF THE UNLIKE: 
A Collection of Evolution Essays Suggested 
by the Study of Domestic Plants. By L. H. 

BAILEY, Professor of Horticulture in the Cornell 
University. 

THIRD EDITION— 515 PACES — 22 ILLUSTRATIONS— $2.00 

To those interested in the underlying philosophy 
of plant life, this volume, written in a most enter- 
taining style, and fully illustrated, will prove wel- 
come. It treats of the modification of plants under 
cultivation upon the evolution theory, and its atti- 
tude on this interesting subject is characterized 
by the author's well-known originality and inde- 
pendence of thought. Incidentally, there is stated 
much that will be valuable and suggestive to the 
working horticulturist, as well as to the man or 
woman impelled by a love of nature to horticul- 
tural pursuits. It may well be called, indeed, a 
philosophy of horticulture, in which all interested 
may find inspiration and instruction. 

The Survival of the Unlike comprises thirty essays touching 
upon The General Fact and Philosophy of Evolution (The Plant 
Individual, Experimental Evolution, Coxey's Army and the Russian 
Thistle, Recent Progress, etc.); Expounding the Fact and Causes of 
Variation (The Supposed Correlations of Qualify in Fruits, Natural 
History of Synonyms, Reflective Impressions, Relation of Seed- 
bearing to Cultivation, Variation after Birth, Relation between 
American and Eastern Asian Fruits, Horticultural Geography, Prob- 
lems of Climate and Plants, American Fruits, Acclimatization, Sex 
in Fruits, Novelties, Promising Varieties, etc.); and Tracing the 
Evolution of Particular Types of Plants (the Cultivated Strawberry, 
Battle of the Plums, Grapes, Progress of the Carnation, Petunia. 
The Garden Tomato, etc.). 



CYCLOPEDIA Of 
AMERICAN HORTICULTURE 

COMPRISING DIRECTIONS FOR THE CULTIVATION OF HORTICULTURAL 
CROPS, AND ORIGINAL DESCRIPTIONS OF ALL THE SPECIES OF 
FRUITS, VEGETABLES, FLOWERS AND ORNAMENTAL PLANTS KNOWN 
TO BE IN THE MARKET IN THE UNITED STATES AND CANADA 

By L. H. BAILEY 

ASSISTED BY MANY EXPERT CULTIVATORS AND BOTANISTS 

In Four Quarto Volumes, 
Illustrated with over Two Thousand Original Engravings 

THIS monumental work, the most comprehensive 
review of the vegetable world yet made by an 
American, is now in the press. Though distinctly 
an American work, not only plants indigenous to 
the North American continent are mentioned, but 
also all the species known to be in the horticul- 
tural trade in North America, of whatever origin. 
It is really a survey of the cultivated plants of the 
world. 

The Editor, Professor L. H. Bailey, has been 
gathering material for this Cyclopedia for many 
years. He has enlisted the cooperation of men of 
attainments, either in science or practice everywhere, 
and the Cyclopedia has the unique distinction of 
presenting for the first time, in a carefully arranged 
and perfectly accessible form, the best knowledge of 
the best specialists in America upon gardening, 
fruit-growing, vegetable culture, forestry, and the 



like, as well as exact botanical information. It is 
all fresh, and not a rehash of old material. No 
precedent has been followed ; the work is upon its 
own original plan. 

Many scientific botanical authors of justly high 
repute decline to give attention to the important 
characters of cultivated plants, confining their work 
to the species in the original forms only. Pro- 
fessor Bailey takes the view that a subject of com- 
mercial importance, one which engages the attention 
and alfects the livelihood of thousands of bright 
people, is decidedly worthy the investigation of the 
trained botanist. In the Cyclopedia of American 
Horticulture, therefore, very full accounts are given 
of the botanical features of all important commercial 
plants, as the apple, cabbage, rose, etc. At the same 
time, practical cultivators submit observations upon 
culture, marketing, and the like, and frequently two 
opinions are presented upon the same subject from 
different localities, so that the reader may have 
before him not only complete botanical information, 
but very fully the best practice in the most favor- 
able localities for the perfection of any fruit or 
vegetable or economic plant. 

ILLUSTRATIONS 

The pictorial character of the work is likewise 
notable. There are over two thousand illustrations, 
and they are all made expressly for this work, either 
from accurate photographs or from the specimens. 
These illustrations have been drawn by competent 



horticultural artists, in nearly every case under the 
eye of the Editor, or with the supervision of some 
one of the sub -editors. No "trade" cuts are used. 

In planning the illustrations, artistic effect has 
been kept in view, and while no drawing is used 
which does not show its subject with perfect scien- 
tific accuracy, the monotonous so-called "botanical" 
outlines, often made from lifeless herbarium speci- 
mens, are notably absent. The intention is to sho^w 
the life of the plant, not merely its skeleton. 

CONTRIBUTORS, SYSTEM, ETC. 

As above mentioned, the contributors are men 
eminent as cultivators or as specialists on the various 
subjects. The important articles are signed, and it 
is expected that the complete work will include fully 
5,000 signed contributions by horticulturists, culti- 
vators and botanists. 

The arrangement is alphabetical as to the genera, 
but systematic in the species. A very simple but 
complete plan of key -letters is used, and the whole 
arrangement is toward ease of reference as well as 
completeness of information. To each large genus 
there is a separate alphabetic index. 

Important commercial subjects are treated usually 
under the best known name, whether it be the 
scientific or "common" designation. Thus, the apple 
is fully discussed as apple, rather than as Pyrus 
Malus, and the carnation comes into view in the 
third letter of the alphabet, not as Dianthus Caryo- 
phyllus. Carefully edited cross-references make it 



easy to find any desired subject, however, in the 
shortest time. 

The plan of presenting the full details of cul- 
ture of important plants, through the views of 
acknowledged practical experts upon the various 
subjects, assures the great value of the book to the 
man or woman who is obtaining a living from 
horticultural pursuits. 

A special feature of the Cyclopedia of American 
Horticulture is its wealth of bibliographic reference. 
The world's horticultural literature has been thor- 
oughly searched, and most carefully indexed, so that 
the student will find citations to every available 
article or illustration upon any subject consulted. 

DETAILS Of PUBLICATION 

The Cyclopedia of American Horticulture is to 
be completed in four handsome quarto volumes, 
embracing about two thousand pages, with more 
than that number of original illustrations. It is 
carefully printed upon specially made paper of a 
permanent character. The first volume (A to D, 
509 pages, 743 illustrations, 9 plates) is now ready, 
and the work is expected to be completed during the 
year 1900. 

The work is sold only by subscription, and 
orders will be accepted for the full set only. 
Terms and further information may be had of 
the Publishers, 

THE MACMILLAN COMPANY 

No. 66 Fifth Avenue NEW YORK 



L 



WORKS BY PROFESSOR BAILEY 

ESSONS WITH PLANTS: Sugges- 
tions for Seeing and Interpreting Some of 
the Common Forms of Vegetation. By L. 

H. BAILEY, Professor of Horticulture in the Cornell 
University, with delineations from nature by W. S. 
HOLDSWORTH, of the Agricultural College of 
Michigan. 

SECOND EDITION— 491 PACES— 446 ILLUSTRATIONS— 1 2 MO- 
CLOTH— $1.10 NET 

There are two ways of looking at nature. The 
old ivay, which you have found so unsatisfactory, 
was to classify everything — to consider leaves, roots, 
and whole plants as formal herbarium specimens, 
forgetting that each had its own story of growth 
and development, struggle and success, to tell. 
Nothing stifles a natural love for plants more effect- 
ually thad than old way. 

The new way is to watch the life of every grow- 
ing thing, to look upon each plant as a living 
creature, whose life is a story as fascinating as the 
story of any favorite hero. "Lessons with Plants" 
is a book of stories, or rather, a book of plays, for 
we can see each chapter acted out if we take the 
trouble to look at the actors. 

" I have spent some time in most delightful examination of it, and the 
longer I look, the better I like it. I find it not only full of interest, but 
eminently suggestive. I know of no book which begins to do so much to 
open the eyes of the student— whether pupil or teacher — to the wealth of 
meaning contained in simple plant forms. Above all else, it seems to be 
full of suggestions that help one to learn the language of plants, so they 
may talk to him."— Darwin L. Bardwell, Superintendent of Schools, Bing- 
hamton. 

"It is an admirable book, and cannot fail both to awaken interest in 
the subject, and to serve as a helpful and reliable guide to young students 
of plant life. It will, I think, fill an important place in secondary schools, 
and comes at an opportune time, when helps of this Mnd are needed and 
eagerly soiight."— Professor V. M. Spalding, University of Michigan. 

FIRST LESSONS WITH PLANTS 

An Abridgement of the above. 117 pages — 116 illustra- 
tions — 40 cents net. 



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